The Real Estate Commission has voted to support legislation proposed by North Carolina Attorney General Roy Cooper to address abuses in real estate transactions where dealers contract to purchase for resale real estate subject to an existing loan or deed of trust.
The legislation would not apply to real estate licensees because resale dealers who have real estate licenses are regulated by the Commission.
Problems with resale dealers arise when a purchase contract enables the dealer to buy and resell property for a profit, “subject to” an existing loan. The terms of most loans call for repayment of the entire amount owed if the property is sold. Often, the person from whom the dealer purchased the property is not aware of this “due on sale” clause and assumes that the dealer is responsible for paying off the loan. However, the original owner is still responsible for the loan.
If the resale effort is unsuccessful and the dealer simply walks away, the owner may face an immediate demand for payment of the loan from the original financing source.
The legislation proposed by Attorney General Cooper would require a resale dealer to make certain disclosures at least seven days before entering into a real estate transaction with a homeowner/seller. These would include statements disclosing that:
• The homeowner/seller is not relieved of responsibility for the existing mortgage and will be held responsible for any delinquencies or defaults if the real estate resale dealer fails to make payments.
• The current mortgage loan or deed of trust may contain a “due on sale” clause obligating the homeowner/seller to inform the lender at any time title to the property is transferred and that the lender has the right to call the entire amount of the loan due at that time.
• The homeowner/seller should consult an attorney as to his or her liability and obligations for providing insurance and for maintenance of the property.
• The resale dealer has secured a bond as required by state law with the surety company’s name and address provided and advice to check with the surety company to determine the bond’s current status.
• The nature of the resale dealer’s business and people involved with it including the number of transactions entered into within the preceding 12 months and a description of services to be rendered.
Additional disclosures relate to tenant/buyers and encompass deposits, down payments and payment for options to purchase, any existing deed of trust and related obligations, advice concerning eligibility for a mortgage and the dealer’s securing of a bond.
If the law passes, copies of the disclosure statements must be filed with the Secretary of State’s office before any advertising is undertaken or representation to buyers is made. A copy of the state law must be provided to participants in any real estate resale transaction seminar. Finally, any resale dealer who offers to assist a purchaser in securing financing must be licensed as a mortgage broker.
This article came from the May 2005-Vol36-1 edition of the bulletin.
Continuing its efforts to increase its accessibility to licensees, the Real Estate Commission held its February meeting in Greensboro.
The Commission was welcomed by the Honorable Bruce E. Davis, chair of the Guilford County Board of Commissioners and by Guilford County Manager Willie A. Best and also met with members and staff of the Greensboro Regional REALTORS® Association, the High Point Regional Association of REALTORS® and the North Carolina Association of REALTORS® who joined in welcoming the Commission to its first-ever meeting in Greensboro.
The Commission will hold its July meeting in New Bern.
This article came from the May 2005-Vol36-1 edition of the bulletin.
On February 22, the Real Estate Commission dedicated its Raleigh office building in honor of State Senator Tony Rand. More than 100 persons attended a dedication ceremony including Lieutenant Governor Beverly Perdue, members of the Council of State and General Assembly, members of the Real Estate Commission, and family and friends of Senator Rand and his wife, Karen.
Commission Executive Director Phillip Fisher presided over the ceremony which began with an invocation delivered by Senate Chaplain Mike Morris, followed by the presentation of colors by the Color Guard from the Army ROTC at Senator Rand’s alma mater, UNC-Chapel Hill.
Commission Vice-Chairman Marsha Jordan led the audience in the Pledge of Allegiance, and Kirby Ann Troutman sang the National Anthem. A choral group of Commission staff members accompanied by pianist Ronald Williams then performed a state anthem composed by Mr. Fisher entitled “The Longleaf Pine”.
In her keynote remarks, Lieutenant Governor Perdue praised Senator Rand for his leadership and contributions to North Carolina, and Commission Chairman Matthew J. “Rick” Watts formally dedicated the building “The Tony Rand Building.”
Senator Rand closed the ceremony by accepting the honor, stating that “The real estate industry in North Carolina is such an important part of what North Carolina is about…not only to the economy of our state but to the human condition, that persons have a place to live and call their own, a spot that is particular to them and a place of refuge.”
In a separate ceremony following the dedication of its office building, the Commission dedicated its conference room in memory of former Commission Chairman Billie J. Mercer who served on the Commission from 1995 until her passing in 2001. In addition to members of the Real Estate Commission and staff, the ceremony was attended by former Commission members Mona Hill, John Bridgeman and Kemp Sherron who served with Mrs. Mercer, and by Immediate Past-President of the N.C. Association of REALTORS® Connie Corey who was a close friend of Mrs. Mercer.
This article came from the May 2005-Vol36-1 edition of the bulletin.
Following a rulemaking hearing February 9 in Greensboro, the Real Estate Commission adopted rule changes which, if approved by the Rules Review Commission, will become effective July 1, 2005.
In addition to technical changes, the new rules address real estate school advertising, facilities, prelicensing instructors, course completion reporting and payment of fees; minimum size of digital images of trust account checks maintained by banks; continuing education exemption for licensees who are sitting members of Congress; and penalties for obtaining, attempting to obtain and/or using license examination questions.
The rule changes also change the term “principal broker” to “qualifying broker” to more accurately reflect the duties of persons qualifying firms for licensure, and the term “personally” to “directly” in the rule requiring brokers-in-charge to supervise their salespersons recognizing that, in this era of cell phones, e-mail, etc., regular face-to-face contact is not always necessary to adequately supervise salespersons.
Two additional rule changes are likely to affect most practicing brokers and salespersons. The first one addresses the new Alternative 2 in the North Carolina Association of REALTORS®/North Carolina Bar Association Offer to Purchase and Contract form where a buyer may pay a seller an “option fee” for the right to terminate the purchase contract by a certain date for any or no reason. In such cases, if the option fee is given to the buyer’s or seller’s agent, the agent must deliver it to the seller within three days of receipt; however, if during the period while the agent is holding the check the buyer requests that it be returned, the agent must do so.
The other rule change likely to affect licensees is a new requirement that licensees display their real estate license number on listing agreements, buyer agency agreements, and any other agreement for brokerage services, as well as the Working with Real Estate Agents publication to help consumers and other licensees verify licensure.
This article came from the May 2005-Vol36-1 edition of the bulletin.
By Emmet R. Wood, Director, Audits and Investigations
Does your company have adequate internal controls to safeguard your trust account monies? What are internal controls? This is the first part of a series of Auditor’s Corner articles on internal controls. These articles will be based on actual cases investigated by the Audits & Investigation Division of the Real Estate Commission and include examples of real estate companies that had deficiencies in their trust account system of internal controls.
Internal control means different things to different people. Pertaining to real estate trust accounts, internal controls are the policies and procedures designed to safeguard the assets of the trust account and provide reasonable assurance of the reliability of the trust account books and records. Their main objective should be to maintain compliance with the Real Estate License Law, Commission Rules and Trust Account Guidelines. Below is an example of a real estate company that had a trust account defalcation mainly because of poor internal controls.
In a real estate sales company with lots of closings, the bookkeeper would get one or more of the four different owners of the firm, to sign blank trust account checks in advance of the closings. The bookkeeper used some of the signed checks to pay personal bills but recorded on the handwritten check stubs that they were written to an attorney for closing.
When the bank statements came in the mail, they were given to the bookkeeper to reconcile. After opening them, the bookkeeper would remove the checks written for the personal expenditures, prepare the bank reconciliation and provide it to the broker-in-charge for review. The embezzlement was not discovered until a trust account check bounced. Who had to repay the monies embezzled? The owners of the real estate company.
A good system of internal controls may have prevented the embezzlement. One simple internal control would have been for someone other than the bookkeeper to have received the trust account bank statements and reconcile them to the trust account check stubs.
If your company does not have the luxury of more than one bookkeeper, the bank statements could be directed to the broker-in-charge to open and examine them. Another obvious internal control deficiency was signing blank trust account checks. Can you find other internal control deficiencies?
Place yourself in the position of those employees within your company who have access to trust account funds, analyze how they might take them, and design your company’s system of internal controls to minimize the opportunity for embezzlement. You may wish to consult a CPA to help you design your system.
This article came from the May 2005-Vol36-1 edition of the bulletin.
By Larry A. Outlaw, Director of Education and Licensing
A record 202 educators attended the annual North Carolina Real Estate Educators Conference sponsored by the Real Estate Commission on March 7-8, 2005. This was the largest turnout in the 26 years the educators conference has been held.
While attendance at these annual conferences is always excellent, educators were especially interested this year in learning more about the Commission’s proposed legislation to establish a “broker only” license structure, strengthen the education requirements for licensing, and increase broker-in-charge qualification requirements.
A majority of the first day’s program was devoted to a discussion of this proposed legislation. The discussion was led by Larry Outlaw, the Commission’s Director of Education and Licensing, who explained that the legislative proposals resulted from recommendations of the 2004 Broker-in-Charge Advisory Committee formed by the Commission to consider broker-in-charge duties and requirements. Mr. Outlaw reviewed the proposals, which had been disseminated to participants prior to the conference, and explained the rationale of the advisory committee and the Commission for the proposals, as well as Commission plans for implementation of the legislation if enacted. Participants then engaged in a lively discussion of the various proposed changes.
Conference attendees enjoyed very helpful presentations by three experienced instructors. Tony Hawkins spoke on “Working with the Adult Learner,” Dick Norwood addressed “Using Real-Life Examples in Teaching the Broker Course,” and Cindy Chandler shared suggestions on “Teaching the Commercial Section of the Broker Course.”
The first day also featured the annual North Carolina Real Estate Educators Association awards luncheon and business meeting. Tom Mangum, NCREEA President presided over the meeting, and Sandy Williams, NCREEA Immediate Past President, presented the Association’s annual awards.
Cindy Chandler of Charlotte received the Program of the Year award for her “Fundamentals of Commercial Real Estate” course, and Priscilla Senecal of Cornelius was honored as the Educator of the Year. Ms. Senecal was also presented the Commission’s Billie J. Mercer Excellence in Education Award by Matthew J. “Rick” Watts, Chairman of the Real Estate Commission.
Ms. Williams also announced during the morning session that the much anticipated NCREEA-recommended salesperson course final examination was now available for purchase following a lengthy development and pretesting process. She reported that the Association would continue working with Commission staff to produce another version of the examination during the coming year.
The second day of the 1½-day conference primarily featured presentations by members of the Commission’s education staff. Anita Burt, Examination and Education Officer, reported on progress being made to update the license examination, describing an online job analysis project that was under way and the development activities of staff and an Examination Item (Question) Review Committee.
Pam Rorie, Continuing Education Officer, reviewed several rule changes and addressed pertinent issues relating to both CE and prelicense education. Tricia Moylan, Legal Education Officer, presented and discussed summaries of several interesting NC court cases relevant to real estate practice.
Finally, Tom E. Smith, President-Elect of the North Carolina Housing Opportunity Foundation, acquainted attendees with the Foundation’s Homes4NC program that seeks to facilitate and increase housing opportunities in the state, noting particularly how NC REALTORS® can contribute to the Homes4NC program by participating in the Interest on Real Estate Trust Accounts (IORETA) program.
Conference participants were also able to gain information from exhibitors that included the country’s leading real estate publishers and had the opportunity to network among their peers. All in all, the 2005 conference was a resounding success.
Follow Commission Guidelines For Homes4NC Contributions
Real estate brokerage firms and individual licensees may contribute interest earned from trust accounts to the Housing Opportunity Foundation’s Homes4NC, the new non-profit established by the North Carolina Association of REALTORS® in 2004. Licensees who desire to do so should review the guidelines set forth below.
Homes4NC derives funds from interest earned on real estate brokerage trust fund accounts and donations from members and community contributors.
The organization awards grants to nonprofit organizations that enhance the ability of those below 80% of median income to secure housing, provides disaster relief funds on an “as needed” basis to non-profits assisting with an emergency disaster, and promotes access to training opportunities for REALTORS® to increase their knowledge of resources to assist with affordable housing. The non-profit completed its first grant cycle last fall.
NCAR, in establishing Homes4NC last year, cited statistics that one out of every five people in North Carolina pay more than 30% of their income in mortgage payments. Earnings over $14 per hour are required to afford an average two-bedroom apartment and almost $27 per hour to afford the average home.
There is a shortage of affordable housing in the state affecting 20.7 percent of homeowners and 33.4 percent of renters, who spend more than 30 percent of their income on housing payments, NCAR said.
The Housing Opportunity Foundation is organized to promote decent, safe and affordable housing, support education and research of housing issues, provide technical assistance to groups seeking to deal with housing issues and needs, and enhance the ability of state citizens with incomes at or below 80% of median income to secure housing.
Practices and Procedures
The Real Estate Commission determined that the contribution of trust account interest to Homes4NC is in compliance with the Real Estate License Law and Commission rules when participating brokerage firms and licensed individuals adhere to certain practices and procedures:
• There must be specific written authority from the principals in a transaction for a licensee to deposit trust money into an interest-bearing account. This authority must be obtained by the licensee prior to making the deposit, provide for the disbursement of the interest, and be clear and conspicuous. It must specify that the interest is being disbursed to the Foundation or the licensee, and describe how the disbursement will be made.
• When authority is given to disburse to the Foundation, consumers should be given meaningful disclosure of the nature of the Foundation and the purposes to which the interest will be put.
• If a particular client or customer declines to allow the licensee to earn interest for the benefit of the Foundation (or the licensee) on the funds in which he or she has an interest, the licensee must segregate those funds in a separate account that does not bear interest, or that earns interest as directed and agreed by the parties and the licensee.
• As with other trust money, funds which are earmarked to earn interest for the benefit of the Foundation must be deposited in an insured North Carolina bank or savings and loan with the accounts subject to negotiable instruments of withdrawal.
Additional detail relating to these accounts is provided in a Commission opinion letter under Housing Opportunity Foundation on NCAR’s website, www.ncrealtor.org, or the Commission’s website, www.ncrec.state.nc.us.
This article came from the May 2005-Vol36-1 edition of the bulletin.
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.