Matthew J. “Rick” Watts of Fayetteville has been elected chairman and Marsha H. Jordan of Lincolnton, vice chair, of the North Carolina Real Estate Commission for the 2004-2005 term beginning August 1; it was announced by Phillip T. Fisher, Executive Director.
Watts is Broker Associate and Senior Sales Executive with Coldwell Banker United Realty in Fayetteville. In 12 years with Coldwell Banker, he has been a member of the President’s Elite for five years and the President’s Circle for seven years.
Watts entered the real estate business in 1992 after retiring from a 30-year career with the U. S. Army where he achieved the rank of Command Retention Sergeant Major for the XVIII Airborne Corps.
Among numerous military honors, Watts holds the U. S. Army’s Legion of Merit, the highest peacetime award for military achievement and honorable service. He was also featured in the recent book, “100 Sergeants Major of Color”, and was selected as the Fayetteville and Cumberland County Ministerial Council’s “Citizen of the Year” for 2004.
He is a member of the Veterans of Foreign Wars, American Legion, the Airborne and Special Operations Museum Foundation Board and past member of the Executive Committee of the National Association for the Advancement of Colored People, among other organizations.
Watts and his wife, Margaret, a retired teacher with 31 years of service, live in Fayetteville. Their daughter, Tiffany, recently received her doctoral degree from the University of North Carolina at Chapel Hill.
A graduate of the University of Virginia, Jordan entered the real estate business in 1986. She is owner of Apple Realty in Lincolnton, a Graduate of the REALTORS® Institute and a Certified Residential Specialist.
Jordan is a director of the North Carolina Real Estate Education Foundation and a former president of the Lincolnton Board of REALTORS® and Dean of the REALTORS® Institute. Active in community affairs, she has served on the board of directors of the Lincolnton Chamber of Commerce and as president for Downtown Development, and is a member of the Lincolnton Rotary Club.
This article came from the November 2004-Vol35-2 edition of the bulletin.
By Gary R. Caddell
Senior Auditor/Investigator, Training Officer
Have you ever asked yourself questions like those in this article? Do you know the answers? If not, there’s a place where you can get the answers and much more. Plus, you will earn continuing education credit. All you need to do is register for the Real Estate Commission’s “Basic Trust Account Procedures” and “Trust Account Procedures for Resort Property Managers” courses.
The schedule for the Spring 2005 Trust Account Caravan offers twelve “Basic Trust Account Procedures” courses and four “Trust Account Procedures for Resort Property Managers” courses at the following locations: Asheville, Fayetteville, Greensboro,Greenville, Huntersville, Kill Devil Hills, Murphy and Wilmington. You can register on line (it’s faster), or use the registration form in this issue of the Bulletin (See page 10). Each course counts as four hours of elective continuing education credit.
The “Basic Trust Account Procedures” course emphasizes instruction on the preparation and maintenance of trust account records and the reconciliation process. It covers the Commission’s rules on handling and accounting of trust funds in detail, and also covers related topics, such as the Tenant Security Deposit Act. This class is a must for brokers-in-charge and bookkeepers. (Unlicensed bookkeepers are welcome.)
The “Trust Account Procedures for Resort Property Managers” class is designed to assist resort property managers with the complicated process of maintaining trust account records on vacation rentals. This course will also cover recent recommendations from the Real Estate Commission concerning changes to the Vacation Rental Act. Since this course focuses on issues specific to resort property management, the Commission recommends that you attend the Basic course prior to attending the Resort course. The Resort course is only offered during the Spring Caravan, so don’t miss it!
The Spring 2004 Trust Account Caravan was very successful, with a total of 531 attendees. Since demand is expected to remain high, we encourage you to register early to ensure your spot at the Spring 2005 Trust Account Caravan.
Commission Initiates Rulemaking Process
The Real Estate Commission at its October meeting agreed to commence the rulemaking process.
The Commission will consider changes in rules relating to agency agreements and disclosures, proof of licensure, advertising, handling and accounting of funds, offers and sales contracts, business entities and continuing education.
A public hearing will be scheduled, most likely in January, once specific text for these rules has been developed. Licensees should visit the Commission’s website, www.ncrec.state.nc.us, for further information.
This article came from the November 2004-Vol35-2 edition of the bulletin.
The statistics here reflect the activities of the Real Estate Commission during the period from May 1, 2003 to April 30, 2004.
Contact
• 232,500 telephone calls (a 16% increase)
• 2,100,000+ website “hits” (an 840% increase)
Publications
• 805,000 publications distributed to licensees, consumers and applicants
Technology
Made more effective use of technology by:
• Completing migration of 89,000 licensee records to a new and faster Windows-based database system
• Increasing online license renewals to 31%
Licensing
• 167,000 license record changes
• 11,409 applications processed for licenses by examination (a 23% increase)
• 10,430 license examinations administered (a 23% increase)
• 5,281 licenses by examination issued (a 23% increase)
• 3,294 broker licenses issued without examination (a 20% increase)
• 374 licenses issued by reciprocity
• 1,001 firm licenses issued (a 41% increase)
• 278 expired, surrendered and suspended licenses reinstated (a 70% increase)
• 306 license applications regarding character issues reviewed
• 123 license applicant conferences conducted (a 50% increase)
• 6 new and 51 renewed private real estate school licenses
Education
• 42 approvals (a 163% increase) and 22 renewed approvals issued to instructors
• 64 new continuing education elective courses approved (for a total of 305 courses)
• 13 new continuing education sponsors approved (for a total of 179)
• 8 new continuing education Update Course instructors approved (for a total of 109)
• 48 Broker-in-Charge Course sessions conducted for 2,719 licensees
• 2,700 student rosters electronically processed for CE courses
Audits/Investigations
• 109 field investigations completed
• 228 trust accounts examined (a 34% increase)
• 481 persons interviewed
• 26 trust account sessions conducted for 794 students
• 39 “spot inspections” performed on 70 different trust accounts
Legal
• 1,117 case (complaint) files opened (+234 over last year) and 1,098 closed (+193 over last year)
• 19 licensees reprimanded
• 54 licenses suspended
• 26 licenses revoked
• 14 licenses surrendered
• 53 cases utilized conditional remedies
• 14 Recovery Fund hearings conducted
• 26 license application hearings held
This article came from the November 2004-Vol35-2 edition of the bulletin.
Dear Licensee:
The Real Estate Commission’s staff writes to licensees for many reasons, including to inquire about a complaint that has been filed against you or against another agent concerning a matter in which you were involved.
When you receive a Letter of Inquiry from the Commission, you should read and respond to it promptly, no later than 14 days from receipt. If you cannot do so, you may request an extension of time (in advance). You are not required to hire an attorney to respond on your behalf, although you are welcome to hire one if you choose.
To avoid delays, it is important that the Commission has your current residence and business addresses at all times. You must notify this office no later than ten (10) days following any change.
You are required to provide copies of all documentation requested in a Letter of Inquiry. Typically, these might include records of transactions and trust accounts, advertisements, brochures, maps, course completion certificates or even a copy of your complete file pertaining to a transaction.
Most licensees who receive Letters of Inquiry take the letters seriously and respond in a timely manner. However, those few who fail to respond are subject to disciplinary action by the Commission. If you need more time, ask for it. If you have questions, contact the staff member who wrote to you and he or she will be glad to clarify the request.
Sincerely yours,
Stephen L. Fussell
Consumer Protection Officer
This article came from the November 2004-Vol35-2 edition of the bulletin.
Gov. Michael F. Easley has reappointed Real Estate Commission Chairman Matthew J. “Rick” Watts and members Raymond A. “Buddy” Bass and Sang J. Hamilton, Sr., to three-year terms expiring July 31, 2007 and the North Carolina Senate, upon the recommendation of Senate President Pro Tem Marc Basnight, has reappointed Vice Chairman Marsha H. Jordan to a term ending July 31, 2005.
This article came from the November 2004-Vol35-2 edition of the bulletin.
By: Blackwell M. Brogden, Jr., Chief Deputy Legal Counsel
Did you know that the Real Estate License Law allows the Commission to apply to the Superior Court for an injunction to prevent unlicensed people and firms from engaging in real estate brokerage? Unfortunately, the Commission has had to turn to this remedy more often recently than at any time in its history in order to protect the public.
An injunction is an order issued by a judge directing a person or firm to refrain from specified acts or conduct. This form of judicial action is used when a simple judgment for money will not protect the rights of a party in a civil action. Injunctions are used in real property cases to enforce restrictive covenants, stop trespassers, or prevent other interference with an owner’s rights in a property; in commercial cases to prevent misuse of trademarks, copyrighted or patented material or breach of an agreement not to compete; and, in cases brought by a government agency, such as the Commission, to end continuing violations of law or prevent further violations of law.
In order to obtain an injunction, the Commission first files a complaint in civil court and serves the unlicensed person or firm. The defendants can answer the complaint and raise any defenses they may have, e.g. that they are properly licensed or that they are not engaged in unlicensed activity. Ultimately, the question of whether unlicensed conduct has occurred is decided by the court. If the Commission proves the unlicensed activity, the court can issue an injunction requiring the unlicensed person or firm to stop. Failure to comply can result in punishment for contempt of court, including fines and imprisonment.
Of course, not all unlicensed activity is prohibited by law. For example, buying, selling or leasing one’s own property has always been exempt from the License Law. However, occasionally someone without a license will attempt to broker real estate transactions, including leases or sales, without a license. Although such persons may call themselves “consultants” or “advisors,” if they are assisting others in buying, selling, or leasing, for a fee, their conduct is unlawful.
On the other hand, in some cases, unscrupulous persons and firms, while claiming to be dealing on their own account, are actually acting as unlicensed brokers by unlawfully “flipping” property or renting real estate of others through the use of unrecorded sham transactions or using recorded documents that misrepresent the true nature of the transaction.
The Commission’s Legal Division has pursued the civil remedy of injunctive relief against persons and firms who, while claiming to be dealing on their own account, are actually engaged in the unlicensed practice of real estate brokerage. In other cases, the Commission, together with the Consumer Protection Section of the Attorney General’s office, have jointly filed civil suits to halt unlicensed brokerage and to end unfair and deceptive trade practices being used against consumers. In these cases, the Commission and Attorney General’s office may pursue violations of additional statutes, such as the laws governing credit repair services, discount buying clubs, the sale of products regulated as insurance or security interests, and loan fraud.
There are several important actions a licensee can take when confronted with a transaction that may involve unlicensed brokerage activity masquerading as something else:
(1) Advise your client to consult with their own attorney before entering into a transaction with unusual documents or a “creative” approach;
(2) Consult the Consumer Protection Section of the Attorney General’s Office, (919) 716-6000 or www.ncdoj.com;
(3) Contact the Commission’s Legal Services Division, (919) 875-3700, Ext. 131 for additional information.
This article came from the November 2004-Vol35-2 edition of the bulletin.
Previously given only to persons taking the Broker-in-Charge Course, the Real Estate Commission is now making its Broker-in-Charge Guide available to all real estate licensees and interested persons.
The recently revised and redesigned Guide is required reading for anyone who wishes to become the broker-in-charge of a real estate office. What administrative duties are imposed on the broker-in-charge? What supervisory functions must be performed? What are a broker-in-charge’s responsibilities regarding trust accounts? These and many other questions are answered in this informative publication.
Also now available is the latest edition to the Commission’s popular series of “questions and answers” brochures–Questions and Answers on: Real Estate Closings.
Designed to answer many of the questions frequently asked by purchasers about residential real estate closings, the pocket-sized publication covers such topics as loan commitment letters, property inspections, title insurance, deeds, homeowner associations, and closing statements.
For information on purchasing the Broker-in-Charge Guide and Real Estate Closings brochure, see page of this Bulletin or the Commission website (www.ncrec.state.nc.us).
This article came from the November 2004-Vol35-2 edition of the bulletin.
By Emmet R. Wood Director, Audits and Investigations
If you are the broker-in-charge of a real estate office and need to open a bank account to deposit trust funds, the bank account:
For more information on opening trust accounts, please see the Trust Account Guidelines, Section IV under TRUST ACCOUNTS.
This article came from the November 2004-Vol35-2 edition of the bulletin.
GEORGE B. ALLEN (Cherryville) – By Consent, the Commission revoked the broker license of Mr. Allen effective August 6, 2004. The Commission found that Mr. Allen pled guilty in September 2003 in United States District Court to three felony counts involving the possession and distribution of cocaine and was sentenced to 21 months in prison. The Commission also found that Mr. Allen pled guilty in December 2000 to two misdemeanor violations of hunting laws in Gaston County and failed to report these to the Commission as required and, in August 1984, was found guilty of misdemeanor communicating threats and trespass without a license in Gaston County. The Commission noted that Mr. Allen voluntarily disclosed the felony criminal convictions.
ATLANTIC INLAND PROPERTIES, INC. (Greensboro) – The Commission revoked the firm license of Atlantic Inland Properties effective June 1, 2004. The Commission found that Atlantic Inland Properties, a real estate firm, failed to properly deposit and maintain on deposit in designated trust or escrow accounts all funds received for others and failed to account for those funds to their owners. The Commission also found that Atlantic Inland Properties acted outside the supervision of the firm’s broker-in-charge, continued to receive funds of others while on inactive status, allowed unlicensed persons to have access to and withdraw money from a trust account of the firm and undertook to manage a property when the firm had no authority to do so.
JOSEPH W. BELL (Pollocksville) – By Consent, the Commission revoked the salesperson license of Mr. Bell effective September 9, 2004. The Commission found that Mr. Bell failed to timely report convictions in 2002 for driving while impaired and assault on a government official in connection with a domestic dispute, and failed to respond to the Commission’s Letters of Inquiry concerning these matters.
CLIFFORD G. BLAKELY (Kill Devil Hills) – By Consent, the Commission reprimanded Mr. Blakely effective September 10, 2004 on condition that he not engage in association management while licensed by the Commission. The Commission found that Mr. Blakely, as broker-in-charge of a real estate firm engaged in association management, failed to maintain records for association funds in the manner required by Commission rule.
BLUEGREEN CAROLINA LANDS, LLC (Boca Raton, Florida) – By Consent, the Commission reprimanded Bluegreen Carolina Lands effective July 19, 2004. The Commission found that Bluegreen Carolina Lands failed to accurately answer a question on its firm application regarding the license history of its sole shareholder.
MARY ANN BOWERS (Sherrills Ford) – By Consent, the Commission suspended the salesperson license of Ms. Bowers for a period of three months effective July 1, 2004. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Ms. Bowers, as a salesperson with a real estate brokerage firm, obtained written listing agreements on behalf of another broker and real estate brokerage firm without the knowledge of her broker-in-charge. Ms. Bowers then left the firm with which she had been associated and went to work for the other firm.
ANTHONY R. BRIGGS (Southport) – By Consent, the Commission revoked the broker license of Mr. Briggs effective August 1, 2004. The Commission found that Mr. Briggs, as broker-in-charge and principal broker of a real estate brokerage firm, failed to maintain funds belonging to real estate clients and customers in a trust account, failed to maintain adequate records of said funds and converted money belonging to others to his own use. Mr. Briggs neither admitted nor denied the Commission’s findings.
NEAL A. CHASTAIN, II (Dillsboro) – By Consent, the Commission accepted the one-year voluntary surrender of the broker license of Mr. Chastain effective July 19, 2004. The Commission dismissed without prejudice allegations that Mr. Chastain had violated provisions of the Real Estate License Law and Commission rules. Mr. Chastain neither admitted nor denied misconduct.
COASTAL CAROLINAS REALTY, INC. (Ocean Isle) – By Consent, the Commission reprimanded Coastal Carolinas Realty effective June 30, 2004. The Commission found that Coastal Carolinas Realty failed to maintain trust account records accurately and in compliance with Commission rules between August 2000 and August 2002. The Commission noted that Coastal Carolinas Realty subsequently undertook corrective measures to bring the trust account records into compliance.
SHIRLEY D. COLEMAN (Dillsboro) – By Consent, the Commission suspended the salesperson license of Ms. Coleman for a period of six months effective July 1, 2004. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Ms. Coleman, as a buyer agent, agreed to accept as payment of her commission a promissory note secured by a deed of trust and made payable personally to her rather than to the real estate brokerage firm with which she was associated. The Commission noted that Ms. Coleman has acknowledged that any commission is due the firm rather than her personally and has agreed to assign the note to the firm.
CONCEPT 2000 REALTY, INC. (Raleigh) – By Consent, the Commission revoked the firm license of Concept 2000 Realty effective August 1, 2004. The Commission found that Concept 2000 Realty, acting as a real estate broker for sellers, failed to advertise as promised the properties it listed and abandoned its clients. The Commission also found that Concept 2000 Realty refused to respond to a Letter of Inquiry concerning complaints made by the clients. The Commission noted that Concept Realty 2000 refunded to one client certain monies paid to it as fees.
MARY P. COOPER (Fayetteville) – By Consent, the Commission suspended the salesperson license of Ms. Cooper for a period of one year effective July 1, 2004. The Commission then stayed the suspension for a probationary period of two years. The Commission found that Ms. Cooper had exclusive control of the property management trust account and without the benefit of supervision from her broker-in-charge, failed to reconcile the trust account on a monthly basis and failed to maintain evidence of any attempt to reconcile the account. The Commission also found that Ms. Cooper engaged in deficit spending from the property management trust account.
ROBERT J. CRAIG (Hiwassee) – By Consent, the Commission suspended the broker license of Mr. Craig for a period ninety days effective July 1, 2004. The Commission then stayed the suspension for a probationary term. The Commission found that Mr. Craig submitted an offer to purchase a lot to the seller and then neglected to notify the buyers of the seller’s acceptance of the offer. The Commission also found that Mr. Craig inaccurately informed the seller that the buyers would not qualify for financing.
JAMES DAVID DUNAWAY (Cashiers) – By Consent, the Commission suspended the broker license of Mr. Dunaway for a period of one year effective November 1, 2004. Six months of the suspension were to be active with the remainder stayed for a probationary period. The Commission found that Mr. Dunaway failed to disclose on his application for a broker license by reciprocity a 1979 criminal conviction for aggravated assault in Louden County, Tennessee. The Commission also found that in August, 2000, Mr. Dunaway received a deferred prosecution and was placed on probation after pleading guilty to two counts of theft by conversion stemming from his handling of money borrowed from lenders in support of his automobile leasing business. The Commission noted that Mr. Dunaway was cooperative throughout the Commission’s investigation.
FIVE STAR REALTY, INC. (Fayetteville) – By Consent, the Commission suspended the firm license of Five Star Realty for a period of one year effective July 1, 2004. The Commission then stayed the suspension for a probationary period of two years. The Commission found that Five Star Realty’s rental trust account was short $1,700 and that Five Star Realty failed to perform monthly reconciliations or prepare monthly trial balances, and routinely collected less than the full amount of tenant security deposits.
DAVID B. GLADNEY (Fayetteville) – By Consent, the Commission suspended the broker license of Mr. Gladney for a period of one year effective July 1, 2004. The Commission then stayed the suspension for a probationary period of two years. The Commission found that Mr. Gladney, while principal broker and broker-in-charge of a real estate firm, failed to respond to Letters of Inquiry. The Commission also found that Mr. Gladney’s rental trust account was short $1,700 and that he failed to perform monthly reconciliations, and routinely collected less than the full amount of tenant security deposits.
HARVEY W. GOUCH (Cornelius) – The Commission revoked the broker license of Mr. Gouch effective October 1, 2004. The Commission found that Mr. Gouch, as a licensed broker failed to completely and adequately respond to letters of inquiry from the Commission, failed to create and maintain records of a real estate transaction, failed to make those records he did have available to the Commission upon request, and failed to provide the purchaser in the transaction with a copy of the purchase contract at the time the contract was entered and after receiving partial payment of $11,000 for the property.
RONALD S. GREENE (Winston-Salem) – By Consent, the Commission accepted the voluntary permanent surrender of the broker license of Mr. Greene effective July 28, 2004. The Commission dismissed without prejudice allegations that Mr. Greene had violated provisions of the Real Estate License Law and Commission rules. Mr. Greene neither admitted nor denied misconduct.
SANDRAHOLLIDAY-HOWELL (Wilmington) – By Consent, the Commission revoked the broker license of Ms. Holliday-Howell effective June 17, 2004. The Commission found that, while serving as broker-in-charge of a real estate firm, Ms. Holliday-Howell and a broker associate wrote checks against the firm’s operating account without authority and that she converted over $60,000 to her own benefit.
DONALD W. HOWARTH (Bald Head) – By Consent, the Commission reprimanded Mr. Howarth effective June 1, 2004. The Commission found that Mr. Howarth, acting as listing agent in a transaction, did not fully investigate and relate accurate property boundaries to buyers. As a result, the buyers purchased a vacant lot other than the one they intended to purchase. The Commission noted that Mr. Howarth entered into a satisfactory settlement with the buyers, enabling them to secure the property they originally intended to purchase, and that the buyers have listed other properties they own with Mr. Howarth’s firm.
J&W ENTERPRISES, INC. (Dillsboro) – By Consent, the Commission accepted the one-year voluntary surrender of the firm license of J&W Enterprises effective May 1, 2004. The Commission dismissed without prejudice allegations that J&W Enterprises had violated provisions of the Real Estate License Law and Commission rules. J&W Enterprises neither admitted nor denied misconduct.
ROBERT D. JONES (Raleigh) – By Consent, the Commission suspended the salesperson license of Robert D. Jones for a period of nine months effective May 11, 2004. The Commission then stayed the suspension for a probationary period of nine months. The Commission found that Mr. Jones failed to disclose certain criminal convictions between the years 1987 and 1995 on his 1998 salesperson license application. The Commission noted that Mr. Jones did disclose the convictions on his 2003 broker application.
JORDAN LAKE PRESERVE CORPORATION (Pittsboro) – By Consent, the Commission reprimanded Jordan Lake Preserve Corporation effective July 19, 2004. The Commission found that Jordan Lake Preserve Corporation failed to accurately answer a question in its firm license application regarding the prior history of its sole shareholder. The Commission noted that Jordan Lake Preserve Corporation, on its own initiative and before the Commission was aware of the error, voluntarily disclosed the error and submitted corrected information.
BONNIE L. KEELING (Snow Camp) – The Commission revoked the salesperson license of Ms. Keeling effective June 1, 2004. The Commission found that Ms. Keeling, as principal of a real estate firm, failed to properly deposit and maintain on deposit in designated trust or escrow accounts all funds received for others and failed to account for those funds to their owners. The Commission also found that Ms. Keeling acted outside the supervision of her broker-in-charge, continued to receive funds of others while on inactive status, allowed unlicensed persons to have access to and withdraw money from a trust account of the firm and undertook to manage a property when she had no authority to do so.
ERIC S. KENNEDY (Mount Olive) – By Consent, the Commission suspended the salesperson license of Mr. Kennedy for a period of six months effective June 16, 2004. The suspension was then stayed for a probationary period of six months. The Commission found that Mr. Kennedy failed to disclose two misdemeanor convictions on a 1993 application to the Commission. The Commission also found that Mr. Kennedy failed to disclose three additional misdemeanor convictions (all related to driving) after he was licensed. The Commission noted that Mr. Kennedy properly revealed his criminal history in connection with his broker license application.
SHARON M. LANE a/k/a SCARLETT SIMMONS (Raleigh) — By Consent, the Commission revoked the broker license of Ms. Lane effective September 30, 2004. The Commission found that Ms. Lane used the alias ScarlettSimmons. She listed both names as officers and directors on her firm license application and thereby obtained her license by false or fraudulent representation. The Commission also found that Ms. Lane knowingly operated her firm under a new name without meeting the Commission’s name change requirements. In 1998, Ms. Lane deeded property under the name Scarlett Simmons and falsely told the closing attorney that Scarlett Simmons was her mother. In 1999, she gave a creditor a deed of trust in the name Scarlett Simmons and then notarized her own signature using the notary certificate issued in the name Sharon Lane. Finally, the Commission found that Ms. Lane obtained driver licenses and social security numbers in both names.
LOGGERHEAD REALTY, LLC (Southport) – By Consent, the Commission revoked the firm license of Loggerhead Realty effective August 1, 2004. The Commission found that Loggerhead Realty failed to maintain funds belonging to others in a trust account and failed to maintain adequate records of said funds. Loggerhead Realty neither admitted nor denied the Commission’s findings.
ELIZABETH B. MARKHAM (Raleigh) – By Consent, the Commission reprimanded Ms. Markham effective July 1, 2004. The Commission found that Ms. Markham, acting as listing agent for a residential property, failed to discover and disclose information about a planned road construction project that would impact the property, even though MLS listings for other properties in the subdivision included such disclosures. The Commission noted that Ms. Markham cooperated with the Commission in the investigation of the matter and voluntarily entered into a civil settlement with the purchaser.
PATRICK L. MCSWAIN (Gastonia) – By Consent, the Commission suspended the salesperson license of Mr. McSwain for a period of six months effective June 17, 2004. The Commission then stayed the suspension for a probationary period of six months. The Commission found that Mr. McSwain failed to disclose on his 2003 salesperson license application two misdemeanor convictions.
GERRARD A. MILLER (Charlotte) – By Consent, the Commission reprimanded Mr. Miller effective August 1, 2004. The Commission found that Mr. Miller failed to disclose a 1996 conviction of the misdemeanor charge of injury to real property on both his 1999 salesperson license application and on a 2003 license reinstatement application. The Commission noted that Mr. Miller did submit a criminal record check, as required by the new application, which revealed the conviction.
KRISTI A. MILLER (Sanford) – By Consent, the Commission suspended the broker license of Ms. Miller for a period of six months effective June 1, 2004. One month of the suspension is to be active with the remainder stayed for a probationary period of 12 months under certain conditions. The Commission found that Ms. Miller, as broker-in-charge of a real estate brokerage firm, failed to maintain the firm’s trust account records in compliance with the Real Estate License Law and Commission rules, resulting in an overage in the account. The Commission noted that Ms. Miller’s license was on inactive status at the time of its order.
KAREN FAITH MIMS (Four Oaks) – By Consent, the Commission reprimanded Ms. Mims effective September 1, 2004. The Commission found that Ms. Mims, as a real estate broker and certified appraiser, performed approximately eight appraisals containing inaccurate or incomplete information and submitted them to lenders to be used for purposes of obtaining loans.
MORRISON FAMILY REALTY, INC. (Raleigh) – By Consent, the Commission revoked the firm license of Morrison Family Realty, Inc., effective September 30, 2004. The Commission found that Morrison Family Realty, in applying for a firm broker license in 1998, listed two different names as officers and shareholders of the corporation when the names actually represented one person, thus obtaining a firm license by false and fraudulent representation. The Commission also found that in 1999 the firm notified the Commission of a change in its corporate name and, when informed of the items it was required to submit to the Commission to change the name, failed to submit the required items and proceeded to operate under the new name anyway.
AMANDA W. PEELER (Mebane) – By Consent, the Commission suspended the salesperson license of Ms. Peeler for a period of one year effective July 28, 2004. The Commission found that Ms. Peeler failed to disclose a 1999 misdemeanor criminal conviction of “indignities to a police officer” on both her salesperson and broker license applications.
ELLA PETERSON-ROMAN (Greensboro) – By Consent, the Commission revoked the broker license of Ms. Peterson-Roman effective October 1, 2004. The Commission found that Ms. Peterson-Roman, as broker and manager for owners of rental properties, failed to maintain the funds of others in her possession in a trust account, and failed to maintain the records of said funds so as to create a clear audit trail. The Commission also found that Ms. Peterson-Roman failed to account for and remit trust monies, that checks drawn on her trust account were not paid by her bank due to insufficient funds, and that her liability for money belonging to others exceeded the balance on deposit by more than $30,000.
SHERI PHARES-MORITZ (Raleigh) – By Consent, the Commission suspended the broker license of Ms. Phares-Moritz for a period of six months effective August 1, 2004. One month of the suspension was active with the remainder stayed for a probationary period of 12 months. The Commission found that Ms. Phares-Moritz, acting as a real estate broker for sellers, failed to advertise as promised the properties listed by her and abandoned her clients. The Commission also found that Ms. Phares-Moritz refused to respond to a Letter of Inquiry concerning complaints made by the clients. The Commission noted that Ms. Phares-Moritz refunded to one client certain monies paid to her as fees.
CHRISTIAN L. PIGOTT (Ocean Isle Beach) – By Consent, the Commission suspended the salesperson license of Mr. Pigott for a period of nine months effective October 1, 2004. Three months of the suspension are to be active with the remainder stayed for a probationary period of six months. The Commission found that Mr. Pigott, on both his July 2003 salesperson license application and September 2003 broker license application, falsely stated that he had been convicted of only one criminal offense when in fact he had been convicted of four additional offenses: Resisting a Public Officer, Possession of Marijuana, and Reckless Driving (all in 1994) and Reckless Driving to Endanger (2003).
LINDA L. REAVES (Ocean Isle) – By Consent, the Commission reprimanded Ms. Reaves effective June 30, 2004. The Commission found that Ms. Reaves, as principal broker and broker-in-charge of a real estate firm between August 2000 and August 2002, failed to maintain trust account records accurately and in compliance with Commission rules. The Commission noted that Ms. Reaves subsequently undertook corrective measures to bring the trust account records into compliance.
RICHARD G. RICOZZI (Charlotte) – By Consent, the Commission reprimanded Mr. Ricozzi effective July 1, 2004. The Commission found that Mr. Ricozzi, while an active licensed salesperson and an appraiser certified by the North Carolina Appraisal Board, failed to report to the Real Estate Commission a disciplinary action by the Appraisal Board, as required by Commission rules.
SEA RANCH REALTY, INC. (Kill Devil Hills) – By Consent, the Commission reprimanded Sea Ranch Realty effective September 10, 2004 on condition that it not engage in homeowner association management while licensed by the Commission. The Commission found that Sea Ranch Realty, a real estate firm engaged in association management, failed to maintain records for association funds in the manner required by Commission rule.
ANN S. SHIELDS (Pfafftown) – By Consent, the Commission accepted the voluntary surrender of the salesperson license of Ms. Shields for a period of five years effective July 21, 2004. The Commission dismissed without prejudice allegations that Ms. Shields had violated provisions of the Real Estate License Law and Commission rules. Ms. Shields neither admitted nor denied misconduct.
J. C. SMITH (Hickory) – By Consent, the Commission suspended the broker license of Mr. Smith for a period of six months effective July 1, 2004. The Commission then stayed the suspension. The Commission found that Mr. Smith, as principal broker and broker-in-charge of a real estate firm, did not act as the firm’s broker-in-charge and failed to supervise the salesperson employed at the firm.
BOOKER T. TATE (Durham) – By Consent, the Commission revoked the salesperson license of Mr. Tate effective August 24, 2004. The Commission found that Mr. Tate, while operating a real estate brokerage office, failed to properly deposit, maintain on deposit, account for, or remit to those entitled, the funds of others received by him in his capacity as a real estate licensee. Mr. Tate neither admitted nor denied, but did not contest, the Commission findings.
JOAN A. TERHUNE-WALDRON (Hampstead) – By Consent, the Commission revoked the salesperson license of Ms. Terhune-Waldron effective July 19, 2004. The Commission found that Ms. Terhune-Waldron, while in charge of a vacation rental trust account, failed to properly deposit and disburse the funds of others received as a licensee.
WAYNE T. YOUNTS REALTY AND CONSTRUCTION, INC. (Fayetteville) – By Consent, the Commission suspended the firm license of Wayne T. Younts Realty & Construction for a period of one year effective July 1, 2004. The Commission then stayed the suspension for a probationary period one year. The Commission found that Wayne T. Younts Realty & Construction, as a real estate firm broker, failed to maintain its trust account books and records in compliance with the License Law and Commission rules. The Commission noted that no consumers were harmed as a result and the firm’s books and records are now being maintained as required.
KATHY G. WILLIAMS (Maiden) – By consent, the Commission suspended the broker license of Ms. Williams for a period of six months effective July 1, 2004. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Ms. Williams, as broker-in-charge of a real estate brokerage firm, permitted a salesperson employed by another firm and under the supervision of that firm’s broker-in-charge, to obtain written listing agreements on her firm’s behalf without the knowledge of the salesperson’s broker-in-charge. The salesperson then left the firm with which she had been associated and went to work for Ms. Williams’ firm.
JOSEPH H. WILLIAMS (Butner) – By Consent, the Commission revoked the broker license of Mr. Williams effective July 28, 2004. The Commission found that Mr. Williams, while acting as broker-in-charge of a real estate brokerage firm, failed to properly deposit, maintain on deposit, account for, or remit to those entitled, the funds of others received by persons under his supervision in his capacity as a real estate licensee. Mr. Williams neither admitted nor denied the Commission’s findings.
ANNER E. WILLIS (Durham) – By Consent, the Commission reprimanded Ms. Willis effective July 1, 2004. The Commission found that Ms. Willis, as a real estate broker and doing business as Willis Realty, failed to maintain her trust account books and records in accordance with the Real Estate License Law and Commission rules. The Commission noted that Ms. Willis has since taken the Basic Trust Account course and changed her record-keeping to bring the accounts into compliance and that no consumers were harmed as a result of her conduct.
MARC H. WILSON (Celebration, Florida) – By Consent, the Commission reprimanded Mr. Wilson effective May 13, 2004. The Commission found that Mr. Wilson, as broker-in-charge of a real estate office, failed to deposit credit card receipts in a trust account in North Carolina, resulting in the trust account records failing to balance to the trust account bank statements. The Commission noted that no consumer funds were lost and the trust account was brought into balance.
LEROY W. YATES (Rockingham) – By Consent, the Commission revoked the broker license of Mr. Yates effective June 1, 2004, but agreed to grant an application by him for a salesperson license upon certain conditions. The Commission found that Mr. Yates, as broker-in-charge of his own real estate office, was unable to properly maintain the trust account records in the manner required by Commission rule. The Commission noted that Mr. Yates cooperated with the Commission investigation and was resolving the accounting problems by closing out his business.
WAYNE T. YOUNTS (Fayetteville) – By Consent, the Commission suspended the broker license of Mr. Younts for a period of one year effective July 1, 2004. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Mr. Younts, as principal broker and broker-in-charge of a real estate brokerage firm, failed to maintain his trust account books and records in compliance with the License Law and Commission rules. The Commission noted that no consumers were harmed as a result, and Mr. Younts’ books and records are now being maintained as required.
This article came from the November 2004-Vol35-2 edition of the bulletin.
By Janet B. Thoren, Deputy Legal Counsel
Loan fraud involves making false representations to a lender in order to obtain a loan of a larger amount or on more favorable terms than a borrower is otherwise qualified for under the lender’s guidelines.Loan fraud is a federal crime, punishable by up to 30 years in prison and $1 million in fines.In the past, most loan frauds consisted of a single transaction in which the purpose of the fraud was to get a particular buyer into a particular property that the buyer could not otherwise afford.Some examples of this single-transaction type of loan fraud include the following:
•False Gift Letter. A false gift letter is created so that it appears funds being provided to the borrower by another party are a gift, when in fact the funds are being offered as a loan and repayment is expected.
•Contract Kiting.Two contracts are created for the same transaction.One contract contains the actual terms of the agreement between the buyer and the seller.The second contract reflects a higher purchase price and is given to the lender and the appraiser in order to obtain a higher appraisal amount and permit the borrower to obtain a larger loan than he would otherwise be qualified to receive in the transaction.
•False down payment.The contract shows a large down payment made directly to the seller when in fact no down payment was made or the source of funds was not the borrower.
•Secret Second Mortgage.The buyer is not qualified to borrow the full amount needed so the seller consents to a “secret second” in which the seller or real estate agent loans additional funds to the borrower and receives a second mortgage on the property, which may or may not be recorded after closing but which is not disclosed to the lender.
•Secret Concessions or Undisclosed Rebates. The seller or broker offers concessions to the borrower for repairs, closing costs, or other items but fails to disclose these concessions to the lender or show them on the closing statement.
• False Statement of Owner Occupancy. The buyer represents to the lender that the property will be the buyer’s primary residence, when in fact the property is being purchased for rental or other investment purposes.
• False Qualifications of the Borrower. Information related to the buyer’s credit-worthiness, such as income or sources of cash, is misrepresented to the lender through false documentation or other means.
Within the last three years, the FBI’s mortgage fraud caseload in North Carolina has tripled, and real estate agents are being caught up in the newer and more sophisticated schemes.Loan fraud has advanced beyond the stage of a single transaction.Its purpose is no longer to put a single buyer in a particular home, but to intentionally steal loan funds directly from lenders.It has become a business through which a handful of individuals have made millions, but with recent arrests by federal and state authorities, those individuals are now beginning to pay the price.
In order for loan fraud to work on such a large scale, participants in the fraud typically include appraisers and mortgage loan brokers, and occasionally real estate agents and closing attorneys.The newer types of scams have different variations, but basically work like this:
•The scam organizer or promoter identifies himself or his company as a type of real estate developer or investor.The promoter selects a home, usually a new construction property, and negotiates a purchase price with the seller/builder – let’s say $200,000.This price is usually at market value, or it may be significantly lower if the home has been on the market for a while or if the promoter arranges to purchase multiple properties from the same seller/builder.Once the promoter has a property lined up, he recruits a buyer.These buyers are usually homeowners with relatively good credit, but typically don’t have enough income to purchase a second home in a legitimate transaction.
• The promoter offers the buyer the property at a greatly inflated price – for our scenario, let’s say $300,000.The written contract is usually between the seller/builder and the buyer, but reflects the $300,000 purchase price.The promoter convinces the buyer that he can purchase the home with no money down and, in most cases, even promises to give the buyer anywhere from $1,000 to $5,000 in cash outside closing if the transaction closes. The promoter promises the buyer that a tenant is ready to move into the property, and that the rent the tenant pays will be used to pay the mortgage payment.The promoter promises the buyer that the house will be sold within a relatively short period to the tenant for a huge profit, and that the promoter and buyer will then split the profits from the sale.
•Once the buyer is on board, the promoter directs the buyer to a particular mortgage broker and sometimes a closing attorney.Appraisers are used who greatly inflate the value of the property in order to substantiate the purchase price the buyer is to pay for the property.A mortgage broker creates false documents to show that the buyer intends to live in the property, to make sure the buyer appears to be qualified for the loan and to make the property appear to be worth more than the true market value.When the actual lender receives the paperwork, everything appears to be in order and the loan is approved.
•At closing, the promoterhas to make sure that he gets the profits from the loan, not the seller/builder.The seller/builder’s existing loan is paid off and he gets $200,000 for the property, less his closing costs.Closing costs may include a commission to a real estate agent that is based on the amount the seller agreed to receive, $200,000, rather than on the $300,000 purchase price shown on the HUD-1.The promoter receives the remaining funds from the loan, usually shown on the closing statement as a false second mortgage payoff or false assignment fee.Although the closing statement shows the buyer bringing funds to closing, in fact the promoter uses the funds from the loan to pay the buyer’s closing costs, and pay off the appraiser, mortgage broker, and buyer outside of closing.In the end, the promoter walks away with an average profit of $35,000 -$50,000 per transaction.
•The tenant, if there is one, pays rent to the promoter, who in many cases is running an unlicensed property management business.The promoter makes a few mortgage payments and then quits.In many cases, no tenant ever moves into the property and no mortgage payments are ever made.The buyer can’t afford to make two mortgage payments, and the property soon goes into foreclosure.The lenders can’t come close to recovering the full amount of their loans through foreclosure, and the buyer’s credit is ruined.
Banks and other lenders lose millions of dollars every year through mortgage loan fraud.Losses are often passed on to consumers through higher fees.Losses on government-insured loans end up being paid for by taxpayers.Individual consumers who dreamed of a business opportunity that seemed “too good to be true” learn the truth of the old adage the hard way when their credit is ruined and in many cases they are forced into bankruptcy.In addition, because promoters have targeted certain subdivisions repeatedly, false appraisals have caused property tax values in those subdivisions to soar, leaving the few existing legitimate home purchasers in houses that are overvalued for tax purposes and stigmatizing the neighborhoods with numerous foreclosures.
The FBI and SBI have been vigorously pursuing groups of promoters across the state.Some promoters, appraisers, and mortgage brokers have already been charged and other investigations are ongoing.The U.S. Attorney’s office has made a commitment to vigorously prosecute mortgage fraud at all levels, including individuals holding professional licenses who are seen as key factors in safeguarding the system.Such professionals include real estate agents.In addition, the Real Estate Commission has taken an active role in identifying real estate agents involved in these types of transactions and taking disciplinary action when appropriate, including the revocation of licenses and pursuing injunctive relief against unlicensed participants.
Loan fraud can be disguised in many ways.Whether it’s a single transaction loan fraud or a sophisticated scam, the Real Estate Commission expects its licensees to be the guardians of consumers and lenders alike.As such, it is your responsibility to further investigate any real estate transaction in which you are involved if it appears to include possible elements of loan fraud.You are required by law to make full disclosures to all parties, including the ultimate lender, if you suspect fraudulent behavior.Failure to do so may result in disciplinary action against your license, or criminal prosecution by federal and state authorities.
This article came from the May 2004-Vol35-1 edition of the bulletin.