(With permission, portions of this article were written based upon an article appearing in the General Counsel Quarterly, a publication of the North Carolina Association of REALTORS®, Volume VI, Issue One, Summer 2002.)
Have you noticed a change in some of the standard contract forms you are using in your residential sales transactions? The Joint Forms Committee of the North Carolina Association of REALTORS® and the North Carolina Bar Association made several revisions to the standard Offer to Purchase and Contract and related forms.
Offer to Purchase and Contract – the contract now allows the buyer to ask that the seller pay a stated amount toward “any of the Buyer’s expenses associated with the purchase of the Property” (¶8), rather than paying money toward the buyer’s closing costs. This change is designed to eliminate disputes over what constitutes a “closing cost.” Conforming changes have also been made to the FHA/VA Financing Addendum which now specifically provides that the amount paid by the seller includes FHA/VA seller mandated lender and inspection costs.
The contract also now requires that the seller deliver marketable and insurable title to the buyer (¶5(e)). In addition, the contract authorizes the Seller’s current and prior closing attorney, and the Property’s title insurer, to release and disclose title documents to the buyer, agents and attorneys.
Finally, references to an inspection addendum were removed from the Inspections provision (¶12), since no such addendum exists.
Contingent Sale Addendum – the Addendum has been changed to require a buyer who waives the contingency to then close on the purchase of the seller’s property by a specified date. It is designed to assure that buyers waive the contingency only if they are in fact prepared to proceed in a timely manner with the purchase of the seller’s property.
In addition, the “time is of the essence” provision has been expanded to expressly include the closing date.
Additional Provisions Addendum – the provision concerning a Septic System Improvements Permit has been renamed “Sewer System.” It now provides that the contract is contingent upon the buyer obtaining a permit from the County for either a conventional or otherwise described sewer system. All costs are borne by the buyer, except that the seller must pay for clearing as much of the property as the County requires. A deadline must be inserted by which the test is to be performed. The buyer is required to use “best efforts” to obtain the permit and the buyer must notify the seller by a stated deadline if he cannot get the permit, “time being of the essence” – otherwise the condition is deemed satisfied.
In addition, the Appraisal provision was separated into two pieces – one addressing Appraisal with Financing Contingency and one addressing Appraisal Without Financing Contingency.
As to the Flood Hazard Zone provision, it now provides that it “may be” necessary for the purchaser to purchase flood hazard insurance rather than it “will be” necessary.
Other Jointly Approved Forms – minor changes were made to both the Owner Association Addendum and the Option to Purchase. Some of these were made in order to accommodate the use of both forms with the newVacant Land Offer to Purchase and Contract. Others were more technical in nature.
Changes to All Forms – in addition to the substantive changes, all forms are now available in an 8½ x 11 format. Each contains a new disclaimer immediately preceding the signature lines stating that the Bar Association and the Association of REALTORS® “make no representation as to the legal validity or adequacy of any provision of this form in any specific transaction.”
CAVEAT: The Commission’s Update Course this year includes coverage of the Offer to Purchase and Contract and related addenda. Many of the changes noted here also will be addressed in that course.
This article came from the October 2002-Vol33-2 edition of the bulletin.
The Real Estate Commission has approved a recommendation from its Interstate Brokerage Cooperation Advisory Committee (See Bulletin Volume 32, No. 4) to support legislation to create a “Limited Nonresident Commercial Real Estate License.” As proposed, real estate brokers and salespersons licensed in other states could obtain the license from the Commission without having to pass the North Carolina licensing examination.
The license would allow them to perform real estate brokerage acts in North Carolina only in connection with commercial real estate transactions and only while affiliated with a resident North Carolina real estate broker. The nonresident commercial licensee and the resident North Carolina broker would also be required to enter into a “Brokerage Cooperation Agreement” which, among other things, mandates that the North Carolina broker actively and personally supervise the nonresident commercial licensee.
It is anticipated that legislation authorizing the issuance of the special licenses will be considered by the North Carolina General Assembly during its 2003 Session and that, if enacted, it will facilitate and promote commercial and industrial real estate development and investment in our state.
The Commission thanked again the members of its advisory committee and real estate attorney and commercial broker Garth K. Dunklin who joined the committee at its August 7 meeting.
[The Interstate Brokerage Cooperation Advisory Committee’s reports can be found on the Real Estate Commission’s website www.ncrec.state.nc.us. Go to Site Map, then Reports]
This article came from the October 2002-Vol33-2 edition of the bulletin.
Rule A.0113 requires any licensee who is convicted of a misdemeanor or felony or who has disciplinary action taken against him or her by any other professional licensing board to file a report with the Real Estate Commission.
The reporting requirement includes convictions for driving while impaired (“DWI”). The report must be filed within sixty (60) days of the final judgment or board action.
If you have questions about this rule, please call the Commission’s legal division at 919-875-3700 for more information.
This article came from the October 2002-Vol33-2 edition of the bulletin.
Beginning January 1, applicants for North Carolina real estate licenses will be required to include with their license applications a report listing any criminal convictions or charges pending against them or stating they have no convictions or pending charges.
To assist license applicants in obtaining the reports, the new license application form lists the name and contact information for firms which prepare them. Generally, reports can be obtained within two or three days after ordering them and cost around $10; however, an additional fee and time may be required if the applicant has resided in another state within the past reporting period.
According to Commission Chairman Allan Dameron, “The new reporting requirement will better assure that persons entering the real estate business possess the character expected of real estate brokers and salespersons in our State.”
This article came from the October 2002-Vol33-2 edition of the bulletin.
The Real Estate Commission’s Errors and Omissions Insurance Advisory Committee has completed its work and filed its report and recommendations with the Commission. The committee was charged to advise the Commission on whether the Commission should support legislation to require real estate licensees to maintain errors and omissions (E&O) insurance.
As a part of its study, the committee researched insurance programs in the thirteen states which have enacted laws requiring real estate licensees to maintain E&O insurance as a condition for keeping their licenses on active status. The committee also examined the results of an e-mail survey conducted by the North Carolina Association of REALTORS® to gauge the opinion of its members regarding a possible E&O insurance requirement. The committee learned that 77% of the 1300 persons responding to the survey have E&O insurance. Also, according to the survey, a little more than half think the Commission should require all licensees to carry E&O insurance because it would reduce all agents exposure to financial loss as well as protect consumers and enhance the professional image of real estate practitioners.
At the conclusion of its study, the committee, by majority vote, recommended to the Commission that it support legislation which would permit the Commission to require all or certain of its licensees (specifically, persons with active licenses) to purchase errors and omissions insurance and that the Commission consult with the North Carolina Association of REALTORS® and other organizations and parties which may have an interest in such legislation; however, unlike other states, the committee recommended that the legislation not direct the Commission to contract with an insurance provider for a group policy, but rather merely assure that licensees maintain the required insurance. The committee also recommended that the Commission include in a future continuing education Update course instruction on risk reduction, including the benefits of errors and omissions insurance coverage. The Commission approved the committee’s recommendations.
The Commission very much appreciates the valuable assistance given by the following members of its advisory committee: Patrice F. Jones (Belmont), N.C. Association of REALTORS® General Counsel Will Martin, Sharon L. Pelt (Raleigh), David L. Perrot (Kitty Hawk), John D. Van Dyke (Asheville), and Commission Members Allan R. Dameron and Wanda J. Proffitt. The Commission’s Director of Administration, Fran Whitley, and Legal Counsel Tom Miller served as staff advisors, and Executive Director Phillip Fisher facilitated the discussions.
[The Errors and Omissions Insurance Advisory Committee’s report can be found on the Real Estate Commission website www.ncrec.state.nc.us. Go to Site Map, then Reports.]
This article came from the October 2002-Vol33-2 edition of the bulletin.
Over 6,250 licensees have taken the Broker-in-Charge course since its inception in November 2000 through August 30, 2002. Initially the Commission requested that brokers-in-charge who had five years within which to take the class not all rush to attend, as the demand would be too great. While preference still is accorded newly designated brokers-in-charge who must take the course within 120 days, five-year “BICs” are now invited to register for the class (as may any broker) which is offered monthly in Raleigh and Charlotte, bimonthly in Asheville and Greensboro, and every few months in Wilmington, Boone, Greenville and Nags Head.
Licensees receive four hours elective continuing education credit and it satisfies the BIC course requirement for five years. However, licensees should retain the course Certificate of Completion to prove their attendance in case they are designated broker-in-charge within five years, yet are notified by the Commission that they must take the course within 120 days. In that case, the licensee should mail a copy of the Certificate to the Records Division with an explanation that they are exempt from the 120-day requirement.
Lastly, be aware that as of September 1, 2002, licensees who are sole proprietors/ practitioners (i.e. brokers practicing alone) need not declare themselves broker-in-charge unless they either: 1) have associates, or 2) hold trust monies pertaining to brokerage transactions, or 3) advertise or otherwise promote their services as a broker in any manner. Any broker whose license is on active status, but who is not associated with a real estate company (and thus under a broker-in-charge) is viewed as a “sole proprietor” at the moment she/he engages in any activity requiring a real estate license. Salespersons are discouraged from taking the broker-in-charge course until they have their broker’s license.
This article came from the October 2002-Vol33-2 edition of the bulletin.
By Miriam J. Baer, Assistant Director, Legal Services
Do you advertise that you speak Spanish? If so, be certain that your Spanish skills are up to par. The Commission has recently received complaints that agents are advertising that they speak Spanish, when in fact their skills are inadequate to handle a real estate transaction.
With the rising Spanish-speaking population in North Carolina, it may be good marketing to advertise that you speak Spanish or that your firm has the resources to handle a transaction requiring Spanish (or any other foreign language). Just be sure that any representation you make is accurate.
For example, if you advertise that you speak Spanish, you should not have to rely on a translator to assist you. If you advertise that Spanish is spoken at your office, then you or your office should have a Spanish-speaking person available to take a call in Spanish or meet with a Spanish-speaker who arrives at your office.
Perhaps neither you nor any other member of your firm speaks a foreign language, but you are willing to employ a translator when the need arises. In that case, don’t advertise that you speak Spanish (or French or Norwegian). Instead, advertise your readiness to hire a translator to assist in any transaction.
The Commission recently received a complaint about a listing agent whose rider announced, “se habla Espanol” (“Spanish spoken”). The complainant left a voice mail message for the listing agent in Spanish, and didn’t receive a call back for several days. When he finally got the call, the person on the phone represented herself to be the listing agent. According to the complainant, this was not true. In fact, she was a translator, but she was holding herself out to be the agent.
This practice is deceptive. If you are using a translator, be sure to explain to the parties that they are speaking to a translator. This is particularly important if you are doing so by phone or other electronic means where the person to whom you are speaking cannot see you and the translator.
Never let a translator take over a transaction or imply in any way that he or she is licensed. Rather, have the translator do what he or she is trained to do: translate your words, as you are speaking, into the foreign language. This will avoid any misunderstanding about your respective roles in the transaction. It will also help assure that the translator does not engage in the unlicensed practice of real estate.
This article came from the October 2002-Vol33-2 edition of the bulletin.
BEACH BARN REALTY & DEVELOPMENT, INC. (Emerald Isle) – By Consent, the Commission revoked the firm license of Beach Barn Realty & Development effective June 1, 2002. The Commission found that Beach Barn Realty & Development failed to maintain monies belonging to others in a trust account and to properly and adequately maintain trust account records for their clients, tenants and customers.
WILLIAM R. BROWN (Pineola) – The Commission revoked the broker license of Mr. Brown effective June 1, 2002. The Commission found that Mr. Brown, as broker-in-charge of a brokerage firm, failed to account for and remit to his principals all funds of others received by him and failed to create and properly maintain trust account records required by Commission rules. The Commission also found that Mr. Brown engaged in improper, dishonest and fraudulent conduct in misapplying funds and misusing his firm’s trust account to convert to his own use the funds of another company.
DANA L. CALLAWAY (Statesville) – By Consent, the Commission revoked the broker license of Ms. Callaway effective May 16, 2002. The Commission found that Ms. Callaway admitted to misappropriating funds from the trust accounts of the real estate firm with which she was associated. The Commission further found that Ms. Callaway paid partial restitution, but failed to pay the balance secured by a promissory note on or before its due date.
JAMES T. CALLIHAN (Myrtle Beach) – By Consent, the Commission suspended the broker license of Mr. Callihan for a period of six months effective June 10, 2002. The Commission found that Mr. Callihan, as broker-in-charge, continued to operate a firm and renew its license each year despite the prior revocation of the firm’s certificate of authority to do business in North Carolina by the Secretary of State’s office. The Commission also found that Mr. Callihan, as broker-in-charge, delegated his trust account duties to others and failed to see that trust account records were properly maintained as required by the Real Estate License Law and Commission rules.
HERBERT B. CONNER (Matthews) – The Commission accepted the voluntary surrender of the broker license of Mr. Conner for a period of one year effective November 1, 2002. The Commission dismissed without prejudice allegations that Mr. Conner violated provisions of the Real Estate License Law and Commission rules. Mr. Conner neither admitted nor denied misconduct.
RICHARD K. DUFF (Carolina Beach) – By Consent, the Commission revoked the broker license of Mr. Duff effective August 1, 2002. The Commission found that Mr. Duff, as broker-in-charge of a real estate firm, failed to provide to owners of rental property under his management monthly statements and to account for funds collected from tenants.
RICKEY D. EPPERSON (Winston-Salem) – By Consent, the Commission suspended the salesperson license of Mr. Epperson effective May 16, 2002. The Commission then stayed the suspension for a period of six months effective May 16, 2002. The Commission found that Mr. Epperson failed to provide full disclosure of a prior criminal conviction on his application for a salesperson license, although he subsequently disclosed the conviction on an application for a broker license.
FEDERAL POINT REAL ESTATE (Carolina Beach) – By Consent, the Commission revoked the firm license of Federal Point Real Estate effective August 1, 2002. The Commission found that Federal Point Real Estate, a real estate brokerage firm, failed to provide to owners of rental property under its management monthly statements and to account for funds collected from tenants.
MICHAEL D. GREENE (Hickory) – The Commission accepted the permanent voluntary surrender of the salesperson license of Mr. Greene effective August 1, 2002. The Commission dismissed without prejudice allegations that Mr. Greene violated provisions of the Real Estate License Law and Commission rules. Mr. Greene did not admit misconduct.
WILLIAM R. HALBERSTADT (Charlotte) – By Consent, the Commission reprimanded Mr. Halberstadt effective June 10, 2002. The Commission found that Mr. Halberstadt, in advertising a house he had listed, misrepresented the square footage of the living area and buyers relied on that representation in purchasing it. The Commission noted that while Mr. Halberstadt’s representation was material, it was not intentional and that the appraised value of the property was consistent with the price paid by the buyers.
ANN HANCOCK (Oxford) – By Consent, the Commission reprimanded Ms. Hancock effective July 1, 2002. The Commission found that Ms. Hancock sold a house and lot with the representation that an incomplete apartment could be completed and occupied and that the property was suitable for use as a bed and breakfast inn. The Commission found that applicable zoning restrictions forbade use of the apartment as a separate residence and required special permission for use of the property as a bed and breakfast inn.
REID A. HARRIS (Emerald Isle) – By Consent, the Commission revoked the broker license of Mr. Harris effective June 1, 2002. The Commission found that Mr. Harris, as broker-in-charge, failed to maintain monies belonging to others in a trust account and to properly and to adequately maintain trust account records for his clients, tenants and customers. The Commission also found that Mr. Harris failed to report a criminal conviction as required by Commission rules.
JOHN J. HIRCHAK, et. al. (Castle Hayne) – By Consent, the Commission accepted the voluntary surrender of the broker license of Mr. Hirchak for a period of one year effective June 1, 2002. The Commission dismissed without prejudice allegations that Mr. Hirchak violated provisions of the Real Estate License Law and Commission rules. Mr. Hirchak neither admitted nor denied misconduct.
EUGENE W. JOHNSON (Charlotte) – By Consent, the Commission revoked the broker license of Mr. Johnson effective August 15, 2002 and subsequently issued him a salesperson license. The Commission found that Mr. Johnson obtained a firm license and operated the firm after it was administratively dissolved. The Commission further found that Mr. Johnson failed to maintain trust account records as required by Commission rules and that he commingled the funds of others with his own.
JANCIE L. MACMICHAEL (Sylva) – By Consent, the Commission suspended the broker license of Ms. MacMichael for one year effective June 10, 2002. The Commission then stayed the suspension for a probationary term of one year. The Commission found that Ms. MacMichael, as broker-in-charge of her sole proprietorship, failed to properly maintain trust account records so as to establish a clear audit trail. The Commission noted that Ms. MacMichael has since corrected her trust account records and ceased her property management business.
DAWN J. MCCALL (Balsam Grove) – The Commission accepted the permanent voluntary surrender of the salesperson license of Ms. McCall effective August 1, 2002. The Commission dismissed without prejudice allegations that Ms. McCall violated provisions of the Real Estate License Law and Commission rules. Ms. McCall did not admit misconduct.
REBECCA K. PADGETT (Fallston) – The Commission revoked the salesperson license of Ms. Padgett effective August 1, 2002. The Commission found that Ms. Padgett, while enrolled in a broker pre-licensing course, consulted course review materials during the final examination when she was not permitted to do so under the rules established for the examination.
GEORGE W. PHILLIPS, II (Pittsboro) – By Consent, the Commission reprimanded Mr. Phillips effective July 25, 2002. The Commission found that Mr. Phillips, in applying for a real estate license, omitted pertinent information from his application, including several outstanding judgments that had been levied against him. The Commission also found that after Mr. Phillips was licensed as a salesperson, he failed to disclose that disciplinary action had been taken against his auctioneer license.
BERTHA F. PYNE (Greenville) – By Consent, the Commission reprimanded Ms. Pyne effective July 25, 2002. The Commission found that Ms. Pyne, acting as a notary public, performed an improper notarization in a real estate transaction and that the North Carolina Secretary of State revoked her notary commission.
ANN H. SCOTT (Wilmington) – By Consent, the Commission reprimanded Ms. Scott effective June 13, 2002. The Commission found that Ms. Scott did not disclose to the seller of property she had listed the precarious financial situation of a buyer she procured.
SUZANNE B. SMITH (Boone) – By Consent, the Commission suspended the broker license of Ms. Smith for a period of one year effective July 1, 2002. The Commission then withheld imposition of the suspension effective July 1, 2002 for a probationary term of two years. The Commission found that Ms. Smith failed to safeguard the MLS password of her broker-in-charge after leaving the firm and thus facilitated access to and alteration of the firm’s MLS listings by an unauthorized individual.
MICHAEL S. STEWARD d/b/a STEWARD PROPERTY MANAGEMENT (Clayton) – By Consent, the Commission revoked the broker license of Mr. Steward effective October 1, 2002. It further ordered that Mr. Steward may apply on or after December 30, 2002 and before May 2, 2003 for reinstatement of his real estate salesperson license on certain conditions. The Commission found that Mr. Steward, while acting as a rental manager, converted monies held for landlords and tenants to his own use. The Commission noted that Mr. Steward cooperated with the Commission investigation and restored the missing funds to his trust account.
PHILLIP J. STEWART, JR. (Winston-Salem) – By Consent, the Commission reprimanded Mr. Stewart effective June 1, 2002. The Commission found that Mr. Stewart, while a broker associate with a realty firm, placed the signatures of six of his customers on agency disclosure documents in four transactions. The Commission also found that no consumers appear to have been harmed as Mr. Stewart disclosed all agency relationships at the time of the transactions.
MATTHEW W. SYKES (Hamlet) – The Commission revoked the broker license of Mr. Sykes effective June 7, 2002. The Commission found that Mr. Sykes made a false statement on his application for a broker license, failed to report criminal convictions to the Commission and had been convicted of issuing worthless checks and possession of drug paraphernalia.
PAUL TAN (Cary) – The Commission accepted the voluntary surrender of the broker license of Mr. Tan for a period of one year effective June 12, 2002. The Commission dismissed without prejudice allegations that Mr. Tan violated provisions of the Real Estate License Law and Commission rules. Mr. Tan neither admitted nor denied misconduct.
DALE H. WARD (Boone) – The Commission accepted the voluntary surrender of the broker license of Mr. Ward for a period of two years effective August 1, 2002. The Commission dismissed without prejudice allegations that Mr. Ward violated provisions of the Real Estate License Law and Commission rules. Mr. Ward neither admitted nor denied misconduct.
WILLIAM L. WHITE (Wrightsville Beach) – By Consent, the Commission revoked the broker license of Mr. White effective July 1, 2002. The Commission found that Mr. White, in dealing in transactions on his own account, failed to retain earnest money deposits in separate bank accounts, commingled those funds with his own money and was unable to return the earnest money deposits when the sales contracts did not close.
TAMMY J. WRIGHT (Greensboro) – By Consent, the Commission suspended the salesperson license of Ms. Wright for a period of one year effective August 1, 2002. The Commission then stayed the suspension for a probationary period of three years effective August 1, 2002. The Commission found that Ms. Wright pled guilty to felony possession of cocaine and misdemeanor possession of drug paraphernalia. The Commission noted that Ms. Wright reported these convictions to the Commission as required and participated in an intensive rehabilitation program.
This article came from the October 2002-Vol33-2 edition of the bulletin.
By Ginger L. Britt, Licensing and Education Officer
On February 28 and March 1 the Commission’s 2002 Educators Conference provided a forum for prelicense and CE instructors, school directors, CE sponsors, community college administrators, and publishers to learn more about current education and license law issues. Everyone was welcomed to the SouthPark Suite Hotel in Charlotte on Thursday morning by the Director of Education and Licensing, Larry A. Outlaw, who discussed general education issues.
Ginger L. Britt, Licensing and Education Officer, discussed the schools’ obligation to provide quality education to students attempting to qualify and prepare for license examinations. Ms. Britt reminded instructors of rule changes that hold approved instructors personally accountable for examination performance. Previously, instructors were approved in connection with schools. Ms. Britt also addressed renewal of instructor approval and the new instructor CE requirement that is in addition to an instructor’s individual license CE requirement. Attendees were cautioned to comply with course prerequisites and rules regarding instruction and examination security. Ms. Britt closed with an update of staff’s reviews of videotapes submitted in connection with instructor applications and an overview of the Commission’s New Instructor Seminar (NIS). The NIS is an orientation conducted by Ms. Britt and Vicki Ferneyhough, DREI, that provides training on teaching techniques, materials, available resources, and discussion on rules and license application procedures. Intended for newly approved prelicense instructors, it is also available to previously approved instructors based upon space availability and is provided at no cost to attendees.
Anita Burt, Education and Examination Officer reported on the license examination program, including school and instructor examination performance. Ms. Burt also reported that 95% of license applicants are taking the license examination by computer through Psychological Services, Inc. (PSI).
Vicki Ferneyhough, DREI, and Bill Gallagher, DREI, livened up the conference with a humorous presentation entitled How to Cure Insomnia in 67 Hours or Less that demonstrated undesirable techniques. Newly approved instructors Anjie Grady and Steven A. Parsons demonstrated more desirable methods. The session concluded with a discussion of the most common mistakes made by instructors.
Pamela R. Rorie, CE Officer, addressed issues of particular importance to CE sponsors and instructors. Ms. Rorie gave attendees an overview of the CE program over the years and discussed the changes. One recent innovation is the new system of electronic reporting of course completion information. Further changes were explained and discussed. Ms. Rorie focused on the proposed topics for the 2002-2003 Update Course. Instructors in attendance provided their views on the topics. Ms. Rorie closed with a reminder regarding renewal deadlines.
Emmet R. Wood, Director of Audits and Investigations, related events of cases of trust account mismanagement in his presentation entitled They Should’ve Counted on an Audit. Mr. Wood acknowledged that his investigations sometimes prove facts stranger than fiction. This concept was further supported when Pamela V. Millward, Associate Legal Counsel, discussed case histories surrounding license applications in which applicants should have chosen truth rather than consequences during her session of Truth or Dare (to be Denied a License).
The Commission hosted a buffet luncheon during which the North Carolina Real Estate Educators’ Association (NCREEA) held a chapter meeting and selected new officers. NCREEA presented awards of special recognition. Tim R. Terry was named “N.C. Educator of the Year.” “Program of the Year” went to Bill Gallagher for his CE elective course entitled, REALTOR® Ethics. The election determined that Sandy Williams will follow Deborah Carpenter as president-elect when Ms. Carpenter accepts the presidency from Kimberly D. Stotesbury. Linda Adams remains secretary/treasurer while Bill Gallagher, Sandra Martin, and Mark Brothers were elected as directors
This year’s conference attendance exceeded 150. Assisting with registration were Commission staff members Penny Childress and Wanda Johnson.
This article came from the June 2002-Vol33-1 edition of the bulletin.
Recent inquiries and complaints to the Commission indicate that there is some degree of confusion and misunderstanding, both in the industry and the general public, on the issues of who decides the time and place of closing and who decides the closing attorney to be used by the Buyer or Seller.
The time and place of closing should be negotiated by the parties. An agent may make suggestions about these choices but cannot make a decision.
Likewise, choosing an attorney is the decision of the party desiring representation. While an agent may certainly make a recommendation, an agent cannot make this choice for a party.
The standard “Offer to Purchase and Contract” form recommended by the North Carolina Association of REALTORS® and the North Carolina Bar Association contains two paragraphs addressing these closing issues. Paragraph (8) allocates closing expenses between the Seller and Buyer. Paragraph (14) defines closing, establishes an approximate date, and designates how the deed is to be made. Nothing in the standard form requires the Seller or Buyer to use a particular closing attorney.
There are a number of other sales contract forms in use, typically created by volume sellers such as developers, builders, and in recent years, relocation firms that purchase and re-sell homes on behalf of employers who are moving employees. Often these forms offer no choice or negotiation about time or place of closing but specify circumstances dictated by the seller. The “closing” itself may be defined differently from the standard form. Frequently, such volume sellers offer to bear some of the buyer’s closing costs if the buyer allows the seller to provide or designate the closing attorney for the buyer.
An agent should be aware of what an offer provides on the issues of time and place of closing and choice of legal representation. Disagreements over time and place of closing, while minor, are important and should be resolved. If the offer specifies one party can designate the closing attorney for the other party, make sure the other party is aware of the provision and freely decides to accept it.
Where payment of expenses at closing is a sales concession from a volume seller, a buyer who insists on securing his or her own legal representation usually will have to give up the offered concession. In other words, the buyer will have to pay his or her own closing costs. If the parties cannot agree on these issues, the offer may never become a contract.
Another source of controversy arises when an agent directs or attempts to direct the choice of attorney for a party without specific authority from that party to do so. It appears most agents in these situations simply “take” a transaction to an attorney in order to get the sale closed.
Where an agent selects and engages the services of a closing attorney without proper authority from the party on whose behalf the agent purports to act, the agent can be held personally responsible for the value of the services rendered by the attorney and may be subject to discipline by the Commission.
To avoid complaints involving the selection of a closing attorney, explain to the seller and buyer their respective obligations under the contract with regard to closing, and the services their attorney will perform. Whenever possible, have the Seller and Buyer contact their respective attorneys themselves in preparation for closing.
If an agent is authorized by a party to select or engage an attorney, the party should be placed in direct contact with the attorney as soon as possible to prevent any misunderstandings. An agent should consider obtaining written documentation from any party for whom the agent employs an attorney stating the extent of the agent’s authority and that the party will be financially responsible for the services obtained by the agent..
Controversy and consumer dissatisfaction over the agent’s role in finding a closing attorney can be avoided by a careful professional approach to addressing these issues during the negotiation of a contract, with full disclosure to the parties of the agent’s reasons for suggesting a particular attorney.
This article came from the June 2002-Vol33-1 edition of the bulletin.