JAY B. ANGEL d/b/a ANGEL REALTY ASSOCIATES (Hendersonville) – By Consent, the Commission revoked the broker license of Mr. Angel effective May 1, 2005. The Commission found that Mr. Angel, as broker-in-charge and sole proprietor of a real estate firm, failed to maintain his trust account records in compliance with the Real Estate License Law and Commission rules including failing to reconcile his trust account on a monthly basis, deposit funds in a timely manner and maintain either ledgers for each transaction or a personal funds ledger. The Commission also found that Mr. Angel used trust funds to pay office rent with a resultant shortage in the trust account of $1,235.24, failed to use written listing agreements for his seller clients in certain transactions, and failed to use dual agency agreements when required.
GEORGE R. BERRY (Franklin) – The Commission accepted the voluntary surrender of the salesperson license of Mr. Berry for one year effective March 30, 2005. The Commission dismissed without prejudice allegations that Mr. Berry had violated provisions of the Real Estate License Law and Commission rules. Mr. Berry neither admitted nor denied misconduct.
DORA ANN BLASCHIK (Dillsboro) – By Consent, the Commission reprimanded Ms. Blaschik effective February 24, 2005. The Commission found that Ms. Blaschik failed to report to the Commission a fine imposed upon her as a licensed auctioneer by the North Carolina Auctioneer Board.
VERA G. BESCHER (Corolla) – The Commission revoked the broker license of Ms. Bescher effective March 8, 2005. The Commission found that Ms. Bescher, as principal and broker-in-charge of a real estate firm that managed residential rental properties for owners, made false promises regarding the dispositions of monies entrusted to her by an owner, failed to account for and remit monies coming into her possession belonging to landlord clients and tenants, failed to deposit and maintain client and tenant monies in a trust account, commingled money belonging to others with her own money, and failed to maintain a trust account and records as broker-in-charge.
NORMAN Y. CHAMBLISS, III (Rocky Mount) – By Consent, the Commission suspended the broker license of Mr. Chambliss for a period of two years effective March 1, 2005. Six months of the suspension are to be active with the remainder stayed for a probationary period of 18 months. The Commission found that Mr. Chambliss on October 19, 2004 in the U.S. District Court for the Eastern District of North Carolina, pleaded guilty to and was convicted of the criminal offenses of obstruction of justice and aiding and abetting the commission of a crime, for which he was sentenced to two years’ supervised probation, fined $20,000 and restricted by the court in his right to move about and associate with other persons.
ELIZABETH M. GREEN (Charlotte) – By Consent, the Commission suspended the salesperson license of Ms. Green for a period of one year effective May 1, 2005. One month is to be active with the remainder stayed for a probationary period of one year. The Commission found that Ms. Green engaged in soliciting and conducting business on behalf of another firm before leaving her supervising broker to work for the other firm.
SHARON E. HOGAN (Chapel Hill) – By Consent, the Commission suspended the broker license of Ms. Hogan for a period of six months effective March 1, 2005. One month of the suspension was active with the remainder stayed for a probationary period of one year. The Commission found that Ms. Hogan failed to disclose a pending misdemeanor driving while impaired charge on her February, 2001 salesperson application and her June, 2001 broker application. The Commission also found that Ms. Hogan was convicted of the offense in October, 2001, but did not report her conviction to the Commission until March, 2004.
MICHAEL A. HUDSPETH (Statesville) – By Consent, the Commission revoked the salesperson license of Mr. Hudspeth effective April 14, 2005. The Commission found that Mr. Hudspeth, between 2000 and 2004 and by and throughHudspeth, Inc., an unlicensed corporation, performed real estate brokerage services for a fee without being licensed by the Commission in that he had allowed his license to remain on inactive status since 1993.
ROYAL M. JONES (Highlands) – The Commission suspended of the broker license of Mr. Jones for a period of one year effective December 22, 2004. The Commission found that Mr. Jones, a broker-in-charge of a real estate firm and a licensed appraiser in North Carolina and Georgia, failed to disclose that disciplinary action had been taken against him by the Georgia Real Estate Appraisers Board revoking his license in 2001 and that the North Carolina Appraisal Board suspended his license and ability to instruct prelicensing or continuing education courses for a period of one year in 2001. The Commission also found that Mr. Jones failed to disclose the discipline by the North Carolina Appraisal Board on his applications to the Commission for renewal of his license to operate a private real estate school and for the renewal of his approval as a continuing education instructor.
MICHAEL D. KAIZAR (Wilmington) – By Consent, the Commission revoked the broker license of Mr. Kaizar effective February 10, 2005. The Commission found that Mr. Kaizar engaged in real estate brokerage activities, including rental property management, at a time when his broker license was expired. The Commission also found that Mr. Kaizar collected funds on behalf of his clients and failed to adequately account for and remit those funds, failed to keep adequate records of the funds to be held in trust for others and could not produce all required trust account records upon request.
MARVIN A. KENNEDY (Greensboro) – By Consent, the Commission suspended the broker license of Mr. Kennedy for a period of three years effective March 1, 2005. The Commission found that Mr. Kennedy, as broker-in-charge of a licensed real estate firm engaged in vacation rental management, failed to implement a trust account record keeping system in the manner required by Commission rules.
DUANE A. MARSHALL (Wendell) – By Consent, the Commission revoked the salesperson license of Mr. Marshall effective March 1, 2005. The Commission found that Mr. Marshall, in the U.S. District Court for the Eastern District of North Carolina, pleaded guilty to and was convicted of the criminal offense of unauthorized use of an access device. The Commission also found that Mr. Marshall failed to report his conviction to the Commission in a timely manner.
CHARLENE M. MCILNAY (Blowing Rock) – By Consent, the Commission suspended the broker license of Ms. McIlnay for a period of six months effective March 1, 2005. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Ms. McIlnay failed to maintain her rental trust account in compliance with the Real Estate License Law and Commission rules. The Commission noted that Ms. McIlnay’s sales trust account was in compliance and that she has since sold the rental business to another licensed broker.
BENJAMIN D. MCCUBBINS, III (Cornelius) – By Consent, the Commission suspended the broker license of Mr. McCubbins for a period of six months effective November 1, 2005. Three months of the suspension are to be active with the remainder stayed for a probationary period of one year. The Commission found that Mr. McCubbins, who also holds a real estate appraisal certification from the North Carolina Appraisal Board, was reprimanded by the Board for renewing his license with a check that was subsequently dishonored. The Commission also found that Mr. McCubbins was negligent in the preparation of a particular appraisal and in oversight of another appraisal.
JOSEPH J. MERTES (Cornelius) – The Commission accepted the voluntary surrender of the broker license of Mr. Mertes for a period of one year effective March 24, 2005. The Commission dismissed without prejudice allegations that Mr. Mertes had violated provisions of the Real Estate License Law and Commission rules. Mr. Mertes neither admitted nor denied misconduct.
NORTH BEACH REALTY, INC. (Corolla) – The Commission revoked the firm license of North Beach Realty effective March 8, 2005. The Commission found that North Beach Realty, a real estate firm that managed residential rental properties for owners, made false promises regarding the dispositions of monies entrusted to it by an owner, failed to account for and remit monies coming into its possession belonging to landlord clients and tenants, failed to deposit and maintain client and tenant monies in a trust account and commingled money belonging to others with its own money.
ONE SOUTH LUMINA HOMEOWNERS ASSOCIATION (Wrightsville Beach) – The Commission accepted the voluntary surrender of the firm license of One South Lumina Homeowners Association for a period of one year effective March 1, 2005. The Commission dismissed without prejudice allegations that One South Lumina Homeowners Association violated provisions of the Real Estate License Law and Commission rules. One South Lumina Homeowners Association neither admitted nor denied misconduct.
BEVERLY A. RIDINGS (Fletcher) – By Consent, the Commission suspended the salesperson license of Ms. Ridings for a period of six months effective March 14, 2005. One month of the suspension was active with the remainder stayed for a probationary period of five months. The Commission found that Ms. Ridings failed to report to the Commission a conviction in April 2000 for Driving While Impaired, but did report the conviction in April 2003 after learning of the reporting requirement in a continuing education class. The Commission also found that Ms. Ridings was convicted of Driving While Impaired in January 2004 and reported the second conviction in April 2004.
RUTH KEITH REALTY, INC. (Creedmoor) – By Consent, the Commission suspended the firm license of Ruth Keith Realty for a period of three years effective March 1, 2005. The Commission then stayed the suspension for a probationary period of three years. The Commission found that Ruth Keith Realty, through its broker-in-charge and a salesperson under his supervision, participated in selling a residential property by falsifying the closing statement to show a larger sales price than actually paid by means of a false second mortgage from the seller.
ALICE M. SOLES (Carolina Beach) – By Consent, the Commission suspended the broker license of Ms. Soles for a period of one year effective April 14, 2005. The Commission then stayed the suspension for a probationary period of 18 months. The Commission found that Ms. Soles, as broker-in-charge of a real estate firm, failed to conduct monthly reconciliations of the firm’s rental escrow accounts, thus allowing another licensee to mishandle trust funds. The Commission noted that Ms. Soles funded the resulting shortage in the escrow account.
ARMINA D. SWITTENBERG (Thomasville) – By Consent, the Commission accepted the permanent voluntary surrender of the broker license of Ms. Swittenberg effective March 23, 2005. The Commission dismissed without prejudice allegations that Ms. Swittenberg had violated provisions of the Real Estate License Law and Commission rules. Ms. Swittenberg neither admitted nor denied misconduct.
MARGARET H. TURNER (Wilmington) – By Consent, the Commission suspended the salesperson license of Ms. Turner for a period of six months effective March 1, 2005. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Ms. Turner failed to disclose a pending misdemeanor driving while impaired charge on her December 2001 application for licensure.
JACK R. WATTS (Fayetteville) – By Consent, the Commission reprimanded Mr. Watts effective March 1, 2005. The Commission found that Mr. Watts, as a broker affiliated with a real estate firm, listed several lots in a subdivision for his seller client and advertised one within the subdivision as “horses in back yard” when restrictive covenants prohibited horses from being kept in the subdivision. Facilities to board horses were available adjacent to the subdivision.
BRIAN H. WEAVER (Creedmoor) – By Consent, the Commission suspended the salesperson license of Mr. Weaver for a period of three years effective March 1, 2005. Six months of the suspension are to be active with the remainder stayed for a probationary period of 30 months. The Commission found that Mr. Weaver, acting as a listing agent in a transaction, participated in selling a residential property by means of a false closing statement and other documents to show a larger sales price than actually paid by means of a false second mortgage from the seller.
HERMAN H. WEAVER, JR. (Creedmoor) – By Consent, the Commission revoked the broker license of Mr. Weaver effective March 1, 2005. The Commission found that Mr. Weaver, while acting as broker-in-charge of a real estate firm, participated in causing a closing statement in a residential sales transaction to falsely show a second deed of trust to the seller when he knew that the parties had no intent that any such debt ever be paid or constitute part of the purchase price. Effective April 1, 2005, Mr. Weaver’s salesperson license may be reinstated upon certain conditions.
This article came from the May 2005-Vol36-1 edition of the bulletin.
By Brenda H. Badger, Records Officer
Licensees who are thinking of establishing a real estate firm will want to first understand what is required of them by the North Carolina Real Estate License Law and Commission rules.
There is only one instance where a firm license is not required: a sole proprietorship, which is a business owned and managed by one person who is personally liable for all of its debts and obligations. Every other business entity must be licensed by the Commission and meet various other requirements as outlined below.
The first step in the firm licensing process is to fully complete the “Application for Real Estate Firm License”, which you can obtain by calling the Commission or by emailing a request to educ@ncrec.state.nc.us. Submit it with any related documents indicated in the application and a fee of $30 to the Commission.
Information required on the application includes:
• Legal name of the applying firm.
• Type of business entity (corporation, partnership, limited liability company or other).
• Address of the firm’s principal office.
• Foreign (out-of-state) firm’s principal office address in North Carolina .
• Secretary of State Identification Number (SOSID).
• Principal broker of the firm and broker license number.
• Names and real estate license numbers of corporate officers and shareholders, partners, managers and members, or principals.
• Designation of a broker-in-charge for each office and a “Broker-in-Charge Declaration” form for each one. (If firm licensure is solely for the purpose of receiving compensation for brokerage services performed by the principal broker through another firm, a broker-in-charge designation is not required.)
• History of any criminal convictions and/or charges pending and professional license disciplinary actions relating to any person listed on the application.
• Business intent, if any, to sell or market time shares in North Carolina .
In conjunction with the application, the broker-in-charge must assure that Commission records show an affiliation with the new firm of each broker or salesperson and supervision of each salesperson by the broker-in-charge. A form for these purposes is available from the Commission and on its website, http://www.ncrec.state.nc.us .
Further details of the firm licensing requirements are described in the application itself and in Commission rules, especially rules A.0502 Business Entities, A.0506 Salesperson To Be Supervised By Broker, and A.0110 Broker-in-Charge.
Frequently Asked ??
• Is errors and omissions insurance required? – No.
• Can I work from home? – Yes, but your home becomes the legal address of the licensed entity and, thus, the legal address on Commission records of any licensed salespersons or brokers affiliated with your firm.
• What type of firm should I establish? – That is a business decision that you make depending upon what business and/or financial goals you wish to accomplish. We ask only that you describe the type of firm you are establishing on the application and provide the Commission with a SOSID (Secretary of State Identification Number), if required by state law, and have available any organization documents for Commission review.
• Can a sole proprietor supervise agents?– Yes, as a broker-in-charge.
•As a sole proprietor can I use an assumed name for my business that is different from the legal name?– If you are a sole proprietor using a name that does not set forth your surname, you must first register your assumed name with theCounty Register of Deeds. You should not include the name of a salesperson or unlicensed person in the name of your sole proprietorship.
• Must I declare myself as broker-in-charge? – A licensed real estate firm is not required to have a broker-in-charge if it:
•Has been organized for the sole purpose of receiving compensation for brokerage services furnished by its principal broker through another firm or broker.
• Is designated a Subchapter S corporation by the United States Internal Revenue Service.
•Has no branch office; and
•Has no person associated with it other than its principal broker.
• Is a “privilege license” required for my firm? – The Commission does not issue “privilege licenses”. For information concerning privilege licenses, contact the North Carolina Department of Revenue, (919) 733-3673.
Commonly Used Terms
Principal broker: a principal of a business entity who holds a broker license on active status and in good standing. A firm must have a principal broker to receive a firm license.
Broker-in-charge: an individual who holds a broker license and is so identified to the Commission as such on the Broker-in-Charge Declaration form.
Sole proprietorship: a firm owned and managed by one individual who is solely responsible for all of its debts and obligations.
This article came from the February 2005-Vol35-3 edition of the bulletin.
• Today’s real estate consumers neither know nor care whether their agent has a broker license or salesperson license – they expect the same level of service;
• Persons choosing real estate brokerage as a career would benefit from additional real estate education focusing especially on practical aspects of real estate transactions; and
• Brokers who open and manage real estate offices need more training and experience.
These were some of the conclusions reached by the Real Estate Commission’s 2004 Broker-in-Charge Advisory Committee.In its report to the Commission 1, the committee made several recommendations to address these concerns.Generally, they would create a single (broker) license, require future licensees to complete post-licensing education, and increase the qualification requirements to become broker-in-charge of a real estate office.The Commission concurred with the committee’s recommendations and will seek enabling legislation during the 2005 Session of the North Carolina General Assembly.
Here is a brief description of how the proposed changes in license structure and requirements would affect you:
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IF YOU HAVE A BROKER LICENSE (or obtain one before March 1, 2006),
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You would NOT be affected. |
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IF YOU HAVE A SALESPERSON LICENSE (or obtain one before October 1, 2005), |
Your license would, on March 1, 2006, be converted to a broker license on “provisional” status–active salesperson to active broker and inactive salesperson to inactive broker. While on provisional broker status, you must continue to be supervised by a broker-in-charge when performing brokerage activities and you could not yourself become broker-in-charge of a real estate office.Your license would remain on provisional status until you either (1) certify to the Commission that you have at least four years full-time (or equivalent part-time) experience as a real estate salesperson and/or broker within the past six years, or (2) complete a 24 classroom hour “broker transition course” for which you would receive some continuing education credit.If you do not complete the transition course or satisfy the experience alternative by March 1, 2008, your license would be placed on inactive status, and you would be required to complete a 90-hour course(s) to activate it 2. |
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PERSONS WHO APPLY FOR REAL ESTATE BROKER LICENSESAFTER MARCH 1, 2006 |
Would be required to complete a 90-hour pre-licensing course (currently 67 hours), pass the licensing examination and satisfy the character requirements to obtain a “provisional” broker license. Their licenses would remain on provisional status until they complete an additional 90-hour post-licensing course(s), and if they do not complete the course within two years, their licenses would be cancelled.
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IF YOU WANT TO BE DESIGNATEDBROKER-IN-CHARGE OF A REAL ESTATE OFFICE AFTERMARCH 1, 2006, |
You would be required to complete (within 120 days following designation) an eight-hour “Broker-in-Charge Course” and four-hour “Basic Trust Account Course”. Additionally, you must possess at least one year full-time (or equivalent part-time) experience as a broker and/or salesperson, or have real estate education/experience equivalent to such experience. Also, while designated as a broker-in-charge, you must each year complete a special continuing education course for brokers-in-charge which would satisfy your continuing education elective course requirement for the year. |
The Real Estate Commission believes that moving towards “all-broker offices”, strengthening the requirements for opening and managing real estate offices, and requiring practice-oriented post-licensing education for future licensees not only reflects marketplace realities but will promote professionalism in the real estate business. The Commission commended the advisory committee members for their vision and suggestions for bringing about this transition in a thoughtful and balanced manner.
The members of the 2004 Broker-in-Charge Advisory Committee were Benjamin K. Ball (Morehead City), W. Laynie Beck, Jr. (Fayetteville), John W. Carroll (Asheville), Paul G. Gilmer, Sr. (Greensboro), Philip M. Guy, Sr. (Fayetteville), Commission Member William C. Lackey, Jr. (Cornelius), Robert W. Lawing (Charlotte), Carol H. Lesley (Concord), William H. Lucas (Rich Square), NCAR General Counsel Will Martin, Assistant Attorney General Harriet Worley, and Vance B. Young (Wrightsville Beach).
1A copy of the report is available at the Commission’s website (www.ncrec.state.nc.us) Go to the site map and look under “Reports”.
2Persons who obtain salesperson licenses between October 1, 2005 and March 1, 2006 would also have their licenses converted to broker licenses on “provisional” status on March 1, 2006; however, their licenses would remain on provisional status until they have completed a 90-hour course(s), and if they do not complete the course(s) by March 1, 2008, their licenses would be placed on inactive status.
This article came from the February 2005-Vol35-3 edition of the bulletin.
Janet B. Thoren, Commission Deputy Legal Counsel, has been designated a Special Assistant United States Attorney in the Western District of North Carolina by the U.S. Department of Justice.
Thoren received this designation because of her experience in real estate mortgage fraud cases as well as knowledge of North Carolina Real Estate License Law and procedure.
She will appear on behalf of the United States in the federal district courts, assist in trials and continue as a member of the joint mortgage fraud initiative in the Western and Eastern Districts of the state.
This article came from the February 2005-Vol35-3 edition of the bulletin.
The Real Estate Commission needs your assistance with a study to assure that the real estate license examination continues to be current and appropriate.
If you have an active broker or salesperson license and the Commission has your current email address, you will soon receive an email from the Commission requesting your participation in an online survey to identify and assess the various tasks performed by real estate licensees and the real estate knowledge needed by beginning salespersons to function in a manner that protects the interests of real estate consumers. The survey results will be used as the basis for updating the license examination.
If you receive the email requesting your participation, please help us by clicking on the survey link provided in the email and completing the survey. We know you are busy, but your assistance in helping us to maintain a high quality license examination would be greatly appreciated.
This article came from the February 2005-Vol35-3 edition of the bulletin.
The Commission’s Audits and Investigations Division investigated a series of transactions involving unlicensed corporations that purchased properties or offered to purchase properties at a price at or just below market value and then immediately resold these properties to investors for a profit of anywhere from $30,000.00 to $55,000.00 per property.
Appraisers were paid to artificially inflate the values of the properties in order to support the higher purchase price. Closing attorneys paid the profit to the unlicensed corporations, showing the payments on the closing statements as either false assignment fees or false payoffs of second mortgages.
The corporations promised the investors that they would place tenants in the properties after closing and use the tenants’ rent to cover the investors’ mortgage payments. The tenants were promised that a portion of their rent would be used as a down payment and they would be qualified to purchase the property after one year of renting. The tenants could not qualify, rents were not reserved for down payments, mortgage payments were not made in a timely manner or at all, and in many cases tenants were never even placed in the properties. Most of these properties went into foreclosure, stigmatizing neighborhoods and ruining the credit of the investors.
The Commission revoked the licenses of the real estate agents involved and authorized its attorneys to seek injunctive relief against the unlicensed persons and firms involved. The Appraisal Board revoked the licenses of the appraisers, and the North Carolina State Bar disbarred closing attorneys who knowingly designated payoffs as false second mortgages or assignment fees.The United States Attorney’s Office, Western District of North Carolina, obtained indictments against key players in the loan frauds, including real estate agents, attorneys, and appraisers, and obtained plea agreements for all those indicted. Sentencing is pending. Loan fraud is a federal crime, punishable by up to 30 years in prison and $1 million in fines.
This article came from the February 2005-Vol35-3 edition of the bulletin.
By Janet B. Thoren, Deputy Legal Counsel
The Real Estate Commission is aggressively applying its investigative, prosecutorial and educational resources to assist federal and state authorities in curbing the rising volume of loan fraud in North Carolina .
Within the past three years, the FBI’s mortgage fraud caseload in North Carolina has tripled. Promoters of these schemes have siphoned off millions of dollars from fraudulently obtained loan funds. The impact on North Carolina ’s real estate market has been tremendous.
The Commission has established two priorities with regard to stemming loan fraud: (1) educating agents as to what situations might be “red flags” (see “The Many Faces of Loan Fraud”, Bulletin, May 2004) that require further inquiry by the agent in order to avoid becoming innocently entangled in a fraudulent transaction; and (2) the investigation and prosecution of loan fraud cases.
Commission staff has cooperated with and assisted both federal and state agencies in connection with the investigation and disciplinary action or criminal prosecution of various individuals and entities involved in loan fraud.
• The Commission has sponsored interagency meetings to discuss the issues surrounding the recent surge of loan fraud in North Carolina and to foster cooperation between various agencies, including the United States Attorney’s Office, the SBI, FBI, the Consumer Protection Section of the North Carolina Attorney General’s Office, and other licensing boards.
• Staff members meet on a regular basis with groups of federal and state law enforcement agencies as well as other licensing agencies to discuss pending and potential loan fraud cases.
• Members of the Audits and Investigations Division have been subpoenaed to testify in federal criminal trials and in disciplinary hearings for other licensing boards involving defendants or licensees whose conduct was also the subject of one of the Commission’s investigations.
• Upon request, attorneys in the Commission’s Legal Services Division have assisted prosecutors in the preparation of their cases.
In addition to using its investigative and prosecutorial resources to curb the volume of loan fraud in North Carolina , the Commission has also attempted to educate real estate agents on the new loan fraud schemes and their duty to protect consumers from such fraud whenever possible.
• Commission staff members have made speeches to various groups across the state on the subject of loan fraud and have attempted to identify “red flags” that, if present, should cause an agent to at least inquire further about a transaction before going forward.
• An article on loan fraud was published in the Bulletin (May 2004) in an effort to reach even more agents.
• Course providers have also begun offering courses on loan fraud to help educate agents on the subject.
Educating agents has proved to be a successful approach. As a result, licensees have begun recognizing and reporting potential loan fraud situations. In one situation, Commission staff acted as a liaison between a licensee reporting a potential loan fraud and state and federal authorities who were able to organize an operation that resulted in the arrest of the promoter of the loan fraud scheme. In another situation, the Commission’s staff was able to assist a licensee acting as a seller’s agent in identifying a potential loan fraud on the part of the buyer and advising her seller to seek legal advice and ultimately decline the offer being made to purchase the seller’s property on questionable terms.
The effects of loan fraud can be devastating in many ways. Taxpayers ultimately bear the burden of losses on government-insured loans. When specific subdivisions are targeted for loan fraud, inflated appraisals cause tax values to soar, leaving homeowners being taxed on the inflated values and paying on a mortgage that is often greater than the actual value of the property. In order to sell or even refinance the property, the owner often must take a significant loss and bring a large sum of money to closing. Most owners cannot do this, making foreclosure the only option in many cases.
The cooperative efforts of state and federal agencies, as well as licensing boards, seems to be both effective and efficient. Dozens of individuals have been prosecuted in the federal and state criminal justice system, and many others remain targets of ongoing investigations. Even more have lost their professional licenses and can no longer hold themselves out as being in positions of trust. Most importantly, real estate agents and other professional licensees are beginning to understand the importance of their roles as guardians of the system and to take affirmative steps to ensure that transactions in which they participate are handled in a professional and legal manner. Only the continuous combination of all of these ongoing efforts will bring about the end of mortgage loan fraud in North Carolina .
This article came from the February 2005-Vol35-3 edition of the bulletin.
By Emmet R. Wood, Director, Audits and Investigations
Brokers who sell their own property must not commingle earnest money deposits received in connection with their own properties with funds they hold in trust for other third party clients.
If you are a broker in business as a sole proprietor and you receive an earnest money deposit on a house that you own, it would be commingling to deposit that earnest money deposit into your sole proprietorship’s trust account that contains trust monies for your third party clients. In this situation, you have several options to prevent commingling.
• You could have an attorney hold the deposit but be sure that the contract clearly identifies who is holding the money.
• You could open another trust account to deposit the earnest money deposit on your personally owned property making sure you do not deposit in it any trust monies for third party clients.
Now suppose you have incorporated your real estate business and want to sell a property you own personally. When you receive an earnest money deposit on your personally owned property, you can deposit that earnest money deposit into the corporate trust account and it would not be commingling. But be sure to execute a signed written listing agreement between the corporation and yourself to comply with the Commission’s Rules.
To determine if you would be commingling or not, you need to answer two questions:
1)Who owns the real estate?
2)Who owns the real estate company?
If the two entities are the same legal entity, then it would be commingling to deposit an earnest money deposit on a property owned by that entity into a trust account that maintains earnest money deposits for its third-party clients. In the first example, the owner of the property (you) and the real estate company (you as a sole proprietor) are the same legal entity; thus you would be commingling. In the second example, the owner of the property (you) is a separate legal entity from the real estate company (a corporation); thus, you would not be commingling.
What if in the second example, the owner of the property was your real estate corporation?Would it be commingling to deposit the earnest money deposit into the corporate trust account that contained earnest money deposits held for the corporation’s third party clients?Yes, because the entity that owns the real estate is the same legal entity as the real estate company.
This article came from the February 2005-Vol35-3 edition of the bulletin.
AMERICAN SOUTH, INC. (Greensboro ) – By Consent, the Commission revoked the firm license of American South effective November 1, 2004. The Commission found that American South, acting as brokers and agents for tenants, property owners, buyers and sellers in real estate transactions, failed to maintain trust money in a properly designated trust account, to properly maintain records of the funds held for others and to properly reconcile its records with bank statements. The Commission noted that there was no evidence of misappropriation of monies belonging to clients or customers.
TAYLOR C. BARBOUR (Leland) – By Consent, the Commission permanently revoked the broker license of Ms. Barbour effective November 22, 2004. The Commission found that Ms. Barbour, as a broker-associate with a real estate firm, wrote checks from the operating account at the direction and for the benefit of the firm’s broker-in-charge, but without the firm’s authorization. The Commission also found that Ms. Barbour accepted a washer and dryer for her own benefit, which she paid for with company funds without the authorization of the company. Ms. Barbour neither admitted nor denied the Commission’s findings. The Commission noted that Ms. Barbour subsequently made full restitution to the firm for the cost of the washer and dryer.
JOHN A. BAYNES (Charlotte ) – By Consent, the Commission reprimanded Mr. Baynes effective January 13, 2005. The Commission found that Mr. Baynes, as principal broker of a real estate firm, continued to renew the license of the firm after it had been dissolved by the North Carolina Secretary of State and under that renewed license operated another firm, which had not been licensed by the Commission. The Commission also found that Mr. Baynes allowed a salesperson affiliated with another firm to act on behalf of the firm he supervised before affiliating with his firm. Mr. Baynes neither admitted nor denied but did not contest the findings.
DANIEL M. BLACK (Charlotte ) – By Consent, the Commission reprimanded Mr. Black effective January 13, 2005. The Commission found that Mr. Black, while acting as broker-in-charge of a real estate firm, failed to prevent a salesperson affiliated with another firm and not yet under his supervision from bringing prospective customers to the office Mr. Black supervised and placing those prospects with another agent in the office without the knowledge or consent of the firm with which the salesperson was then affiliated. Mr. Black neither admitted nor denied but did not contest the findings.
ELIZABETH W. BLAND (Wilmington ) – By Consent, the Commission suspended the broker license of Ms. Bland for a period of 120 days effective March 1, 2005. The Commission then stayed the suspension for a probationary period of one year on certain conditions. The Commission found that Ms. Bland developed a tract of land to subdivide and sell individual lots for residential purposes and then entered into a contract with a purchaser for the sale of a lot prior to obtaining final subdivision approval from the local municipality.
BLUE RIDGE RENTALS, LLC (Blowing Rock) – By Consent, the Commission accepted the permanent voluntary surrender of the firm license of Blue Ridge Rentals effective November 18, 2004. The Commission dismissed without prejudice allegations that Blue Ridge Rentals had violated provisions of the Real Estate License Law and Commission rules. Blue Ridge Rentals neither admitted nor denied misconduct.
JACKIE C. CLANTON (Statesville ) – By Consent, the Commission suspended the broker license of Mr. Clanton for a period of one year effective December 1, 2004. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Mr. Clanton listed a tract of land during 1997 and 1998 and then, after a preliminary plat was drawn to subdivide the property, solicited buyers and sold lots in the subdivision prior to receiving final subdivision approval from Iredell County .
JANE H. CREECH (Winston-Salem ) – By Consent, the Commission suspended the broker license of Ms. Creech for a period of six months effective November 18, 2004. Ninety days of the suspension were active with the remainder stayed for a probationary term. The Commission found that Ms. Creech failed to disclose a 1987 impaired driving conviction on her 1999 salesperson and 2000 broker license applications. The Commission also found that Ms. Creech failed to report in timely manner July 2003 and April 2004 convictions for impaired driving.
WILLIAM S. CROWE (Sapphire) – By Consent, the Commission accepted the permanent voluntary surrender of the broker license of Mr. Crowe effective November 18, 2004. The Commission dismissed without prejudice allegations that Mr. Crowe had violated provisions of the Real Estate License Law and Commission rules. Mr. Crowe did not admit misconduct.
OWEN G. DEVEAUX (Charlotte ) – By Consent, the Commission permanently revoked the salesperson license of Mr. Deveaux effective January 13, 2005. The Commission found that Mr. Deveaux, while affiliated with a licensed real estate firm, procured a buyer who agreed to purchase a property at a price of $159,900, then persuaded the seller to accept $31,900 less for the property and arranged for the closing attorney to pay this amount from the loan proceeds to Mr.Deveaux’s unlicensed business as a second mortgage payoff. This second mortgage fee was false, as the seller did not owe a second mortgage fee to Mr. Deveaux or his business. The Commission also found that Mr. Deveaux did not have an agency agreement to represent anyone in the transaction.
DAVID L. DICKEY (Wrightsville Beach ) – By Consent, the Commission censured Mr. Dickey effective December 11, 2004. The Commission found that Mr. Dickey, as broker-in-charge of a real estate firm, failed to properly supervise trust account record keeping in the manner required by Commission rule. The Commission noted that, after a Commission audit, the trust account was brought into balance by the firm and that no consumer lost any money and no funds were misappropriated.
DUFFUS REALTY, INC. (Greenville ) – By Consent, the Commission reprimanded Duffus Realty effective November 1, 2004. The Commission found that Duffus Realty failed to maintain its trust accounts in compliance with Real Estate License Law and Commission rules and held approximately $4,000 in unidentified funds in a rental trust account for which the firm could not account. The Commission noted that Duffus Realty corrected its accounting errors and that its sales account is now in full compliance.
STEVE J. EVANS (Greenville ) – By Consent, the Commission suspended the broker license of Mr. Evans for a period of one year effective December 31, 2004. The Commission then stayed the suspension for a probationary period of four years effective November 25, 2003 on certain conditions. The Commission found that Mr. Evans, as broker-in-charge of a sole proprietorship, failed to keep his trust account records in compliance with Commission rules.
DORISTINE F. FAULK (Fairmont ) – By Consent, the Commission reprimanded Ms. Faulk effective January 18, 2005.The Commission found that Ms. Faulk failed to disclose a 1995 conviction of misdemeanor worthless check on her 1997 salesperson application and a 1998 conviction for a similar offense within 60 days of final judgment as required by Commission rule. The Commission noted that Ms. Faulk disclosed both convictions on her 2004 broker license application.
JAMES R. HADEN (Statesville ) – By Consent, the Commission suspended the broker license of Mr. Haden for a period of one year effective December 1, 2004. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Mr. Haden listed a tract of land during 1997 and 1998 and then, after a preliminary plat was drawn to subdivide the property, solicited buyers and sold lots in the subdivision prior to receiving final subdivision approval from Iredell County .
MONICA M. HAWKE (Southern Pines) – By consent, the Commission suspended the salesperson license of Ms. Hawke for a period of six months, effective December 1, 2004.The Commission then stayed the suspension for a probationary period of one year.The Commission found that Ms. Hawke entered the premises of a former employer without permission from the employer.
JOHNNY E. HEFFNER, SR. (Conover) – By Consent, the Commission suspended the broker license of Mr. Heffner for period of three years effective July 1, 2005. One month of the suspension is to be active with the remainder stayed for a probationary period of three years. The Commission found that Mr. Heffner was twice disciplined by the North Carolina Appraisal Board for, first, performing appraisals that did not comply with the applicable standards and, subsequently, while his appraisal license was suspended as a result of the first action.
DANIEL O. HENNIGAN (Charlotte) – The Commission suspended the broker license of Mr. Hennigan for a period of one year effective November 1, 2004. The Commission then stayed the suspension of a period of two years. The Commission found that Mr. Hennigan was disciplined by the North Carolina Appraisal Board, willfully inflated appraisals and failed to report the suspension of his appraisal certificate to the Commission within 60 days as required by Commission rules.
HUGH M. HOWARD (Durham ) – By Consent, the Commission accepted the permanent voluntary surrender of the broker license of Mr. Howard effective November 1, 2004. The Commission dismissed without prejudice allegations that Mr. Howard had violated provisions of the Real Estate License Law and Commission rules. Mr. Howard did not admit misconduct.
JAMES R. HUNT, JR. (Greensboro ) – By Consent, the Commission suspended the broker license of Mr. Hunt for a period of 24 months effective November 1, 2004. at least, three months of the suspension were to be active with the remainder stayed for a probationary period of 24 months under Mr. Hunt’s completion of the Basic Trust Account Course. The Commission found that Mr. Hunt, acting as principal broker and broker-in-charge of a real estate firm, and as agents for tenants, property, owners buyers and sellers in real estate transactions, failed to maintain trust money in a properly designated trust account, to properly maintain trust account records of the funds held for others and to properly reconcile those records with bank statements. The Commission noted that there was no evidence of misappropriation of monies belonging to clients or customers.
SHERWOOD D. JOHNSON, JR. (Currituck) – By Consent, the Commission suspended the broker license of Mr. Johnson for a period of three years effective October 14, 2004. The suspension was to be active for a period of 18 months with the remainder stayed for a probationary period of 18 months under certain conditions. The Commission found that Mr. Johnson, as broker-in-charge of a real estate firm, deposited the funds of others in his operating account rather than a trust account, thereby commingling the funds of others with his own. The Commission also found that Mr. Johnson failed to retain copies of his trust account records and to produce them for inspection at the request of the Commission and permitted a person not licensed as a broker to oversee the day-to-day operation of the firm without appropriate supervision. The Commission noted that Mr. Johnson made efforts to correct his records and cooperated with Commission auditors.
THOMAS S. LEACH (Gastonia ) – By Consent, the Commission suspended the broker license of Mr. Leach for a period of two years effective December 1, 2004. The Commission then stayed the suspension for a probationary period of four years under certain conditions. The Commission found that Mr. Leach improperly combined two forms to create a lease/purchase agreement which did not adequately address the needs of the parties and failed to properly complete those forms. The Commission also found that Mr. Leach failed to account for monthly payments to be applied to the purchase price for the buyer and disbursed a $5,000 deposit for items not permitted under the terms of the contract. Mr. Leach reimbursed the buyer for the deposit.
TAMMITHA L. LEWIS (Charlotte ) – By Consent, the Commission suspended the broker license of Ms. Lewis for a period of one year effective October 14, 2004. Three months of the suspension were active with the remainder stayed for a probationary period of nine months under certain conditions. The Commission found that Ms. Lewis was charged with larceny while her broker license application was pending and did not disclose the charge at that time. The Commission also found that Ms. Lewis was convicted of larceny in September 2002 and failed to disclose the conviction within 60 days of the final judgment. The Commission noted that Ms. Lewis later disclosed the conviction of her own volition.
THERESA M. LEWIS (Charlotte ) – By Consent, the Commission permanently revoked the salesperson license of Ms. Lewis effective October 13, 2004. The Commission found that Ms. Lewis operated an unlicensed real estate brokerage firm and failed to submit to the supervision of her broker-in-charge. The Commission also found that Ms. Lewis refused to provide either transaction documentation or trust account records to the Commission related to a particular transaction where she had falsely informed the seller that the buyers had deposited a $50,000 earnest money deposit into her trust account. Finally, the Commission found that, in another transaction, Ms. Lewis made changes in the MLS to another agent’s listing without either the agent’s or seller’s permission. In multiple transactions involving a seller, Ms. Lewis failed to provide material facts to the bank, the buyers or the buyers’ lender and gave the bank a contract and closing statement that were different than the documents created by the closing attorney.
STANLEY L. LONG (Matthews) – By Consent, the Commission permanently revoked the broker license of Mr. Long effective January 13, 2005. The Commission found that Mr. Long, as principal broker and broker-in-charge of a real estate firm, procured a buyer who agreed to purchase a property at a price of $164,900, got the seller to accept $27,400 less for the property, and arranged for the closing attorney to pay the difference to Mr. Long as an “assignment fee” from the loan proceeds, a fee that was false. The Commission also found that Mr. Long did not have an agency agreement to represent anyone in the transaction.
LONG REAL ESTATE INVESTMENTS LLC (Matthews) – By Consent, the Commission permanently revoked the firm license of Long Real Estate Investments effective January 13, 2005. The Commission found that Long Real Estate Investments procured a buyer who agreed to purchase a property at a price of $164,900, got the seller to accept $27,400 less for the property, and arranged for the closing attorney to pay the difference to Long Real Estate Investments as an “assignment fee” from the loan proceeds, a fee that was false. The Commission also found that Long Real Estate Investments did not have an agency agreement to represent anyone in the transaction.
DELORES MAPP (West Kenly) – By Consent, the Commission revoked the salesperson license of Ms. Mapp effective November 1, 2004. The Commission found that Ms. Mapp acted as a buyers’ agent for a group of investor-purchasers who contracted to buy a property for $348,000 but the closing statement showed the purchase price as $450,000. The difference was paid back to the investors as a second mortgage payoff; in fact, there was no second mortgage.
WILLIE C. MATTHEWS (Charlotte ) – By consent, the Commission suspended the salesperson license of Mr. Matthews for a period of six months effective December 15, 2004. The Commission then stayed the suspension for a probationary period of six months. The Commission found that Mr. Matthews failed to disclose on his 1998 salesperson application that he had been convicted of driving while license revoked on several occasions between 1987 and 1994, although he did disclose other convictions. The Commission also found that Mr. Matthews failed to disclose on his 2003 application for a broker license certain convictions for driving while license revoked, although he did disclose others, and that he failed to promptly respond to Letters of Inquiry concerning these matters.
PAULETTE ROGERS MCKOY (Garner) – By Consent, the Commission revoked the broker license of Ms. McKoy effective November 1, 2004. The Commission found that Ms. McKoy, as broker-in-charge of a real estate firm, failed to maintain trust account records in the manner required by the Real Estate License Law and Commission rules and that, as a result, funds for an investment group were not properly accounted for while under her control. The Commission also found that Ms. McKoy failed to respond to formal Letters of Inquiry from the Commission in a timely manner. Ms. McKoy will be eligible to apply for reinstatement of her salesperson license after 60 days, upon certain conditions.
PAUL L. MILLER (Winston-Salem ) – By Consent, the Commission suspended the broker license of Mr. Miller for a period of one year effective February 1, 2005. Two months of the suspension are to be active with the remainder stayed for a probationary period of three years. The Commission found that Mr. Miller failed to maintain records of receipt, deposit and disbursement of the funds held for others in the manner required by the Real Estate Law and Commission rules. The Commission noted that Mr. Miller took immediate steps to remedy the problems and completed the Commission’s Basic Trust Account Course.
NATIONS PROPERTY (Raleigh) – By Consent, the Commission revoked the firm license of Nations Property effective November 1, 2004. The Commission found that Nations Property failed to properly maintain trust account records in the manner required by Commission rules.
CHARLENE D. NIELSEN (Greenville ) – By Consent, the Commission reprimanded Ms. Nielsen effective November 1, 2004. The Commission found that Ms. Nielsen, as a real estate broker and the bookkeeper of a real estate brokerage firm, failed to maintain the trust accounts in compliance with the Real Estate License Law and Commission rules. The rental trust account contained approximately $4,000 in unidentified funds for which she could not account. The Commission noted that Ms. Nielsen corrected her accounting errors and the trust account is now in full compliance.
DARRELL S. PENDERGRAPH (Haw River) – By Consent, the Commission revoked the broker license of Mr. Pendergraph effective December 1, 2004. The Commission found that Mr. Pendergraph was convicted in U.S. District Court of 10 counts of mail fraud, seven counts of Making, Possessing, and Altering Forged Securities, and two counts of Transporting Fraudulent Securities in Interstate Commerce. The Commission also found that Mr. Pendergraph was ordered to serve 60 months of incarceration followed by three years of probation, participate in a substance abuse treatment program, refrain from opening new lines of credit without the approval of his probation officer and pay restitution in the amount of $1,431,166.69.
TAM H. PHAN (Raleigh) – By Consent, the Commission suspended the broker license of Mr. Phan for a period of two years effective January 31, 2005. Twelve months of the suspension are to be active and the remainder stayed for a probationary period of two years. The Commission found that Mr. Phan undertook to represent buyers in the purchase of two properties, but failed to disclose to the sellers of one of the properties that he represented the buyers. The Commission also found that Mr. Phan counseled the sellers of that property to cancel their listing contract with the listing broker, counseled one seller to sign the name of the other seller to a contract and to deeds, did not inform his broker of the transaction and misrepresented his relationship with the buyers to the Commission.
SONIA H. RADENCOVICI (Charlotte ) – By Consent, the Commission revoked the salesperson license of Ms. Radencovici effective January 18, 2005. The Commission found that the U.S. District Court of Connecticut adjudged Ms.Radencovici guilty of money laundering and of violating the federal Racketeer Influenced and Corruption Organizations Act (RICO Act)and sentenced Ms. Radencovici to 48 months of incarceration and three years of supervised probation on each count, with the sentences to run concurrently.
STEPHENSON & ASSOCIATES LTD. (Raleigh) – By Consent, the Commission revoked the firm license of Stephenson & Associates effective November 1, 2004. The Commission found that Stephenson & Associates, through its principal broker and broker-in-charge, Thomas A. Stephenson, both a licensed real estate broker and licensed appraiser, relied on representations of the buyer and/or representatives of the buyer in appraising three properties to the effect that numerous and substantial improvements to the properties would be made after closing and then appraised the properties as if the improvements were already in place. The Commission also found that the buyer did not make the improvements after each closing.
THOMAS A. STEPHENSON (Raleigh ) – By Consent, the Commission revoked the broker license of Mr. Stephenson effective November 1, 2004. The Commission found that Mr. Stephenson, both a licensed real estate broker and licensed appraiser, relied on representations of the buyer and/or representatives of the buyer in appraising three properties to the effect that numerous and substantial improvements to the properties would be made after closing and appraised the properties as if the improvements were already in place. The Commission also found that the buyer did not make the improvements after each closing.
C. ELIZABETH SUCHER (Sanford ) – By Consent, the Commission revoked the broker license of Ms. Sucher effective November 5, 2004. The Commission found that Ms. Sucher, as broker-in-charge of a real estate firm between June, 1987 and July, 2001 and again from July, 2002 through June 2004, failed to retain and maintain trust account records in compliance with the Real Estate License Law and Commission rules.
LARRY J. TORRENCE (Sanford ) – By Consent, the Commission revoked the salesperson license of Mr. Torrence effective January 13, 2005. The Commission found that Mr. Torrence, as an owner and sales associate with a real estate firm, failed to maintain the trust accounts of the real estate firm in compliance with the Real Estate License Law and Commission rules. The Commission noted that it is unaware of any consumers who were injured as a result of the issues with regard to maintenance of the trust accounts.
BRENDA L. VENABLE (Wake Forest ) – By Consent, the Commission revoked the salesperson license of Ms. Venable effective January 18, 2005. The Commission found that Ms. Venable failed to disclose on her salesperson license application misdemeanor convictions that occurred between 1982 and 1993 and, after being licensed, failed to disclose a 2000 conviction relating to a domestic dispute. Ms. Venable will be eligible to apply for reinstatement of her license after three months upon certain conditions.
LAWRENCE WILLIAMS (Winston-Salem ) – By Consent, the Commission revoked the salesperson license of Mr. Williams effective January 1, 2005. The Commission found that Mr. Williams failed to advise the seller of two parcels of land to seek subdivision approval by the county prior to subdividing the two lots into five and listing them for sale. Mr. Williams also failed to verify that the subdivision was approved. The Commission also found that Mr. Williams failed to properly identify the first lot being sold and, as a result, the buyer received one of the original parcels, thus making the other lots shown on the proposed subdivision layout unable to be separately marketed.
This article came from the February 2005-Vol35-3 edition of the bulletin.
Responding to recommendations from its 2004 Vacation Rental Advisory Committee, the Real Estate Commission has agreed to support efforts to amend the North Carolina Vacation Rental Act.
One change would simplify the reporting requirements for vacation rental managers and property owners when selling property subject to a vacation rental agreement. Another would subject property owners to the same requirements for refunding rent regardless of whether the tenant is forced to leave the property due to a mandatory evacuation order or is unable to occupy it due to a mandatory evacuation order.
Also upon the recommendation of the advisory committee, the Commission will publish a brochure to better inform owners of vacation rental properties regarding security deposits, vacation interruption insurance, rent refunds and related matters. The full report of the advisory committee is available on the Commission’s website, www.ncrec.state.nc.us.
Serving on the advisory committee were Timothy M. Cafferty (Corolla), Linda A. Hess (Kill Devil Hills), Kim J. Johnson (Blowing Rock), Timothy W. Midgett (Hatteras), S.R. “Buddy” Rudd, Jr. (Oak Island), J. Alan Holden (Holden Beach), Assistant Attorney General Barbara Shaw, NCAR Director of Regulatory Affairs Rick Zechini, Bill Rowe from the N.C. Justice and Community Development Center, and Real Estate Commission members Skip Alston and WandaProffitt. Commission Executive Director Phillip T. Fisher facilitated the discussion.
The Real Estate Commission thanked the advisory committee members for their valuable service in addressing these and other important issues affecting vacation rental consumers, property owners and rental managers.
This article came from the November 2004-Vol35-2 edition of the bulletin.