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Tech Corner: The Commission’s Tech Study Group Investigates New Technology Uses
The Commission’s Tech Study Group, led by Vice Chair T. Anthony Lindsey, is excited to share new technology that is being investigated by the Commission. You can hear more about the Tech Study Group by watching the video below.
If you have any additional questions about the Tech Study Group, please visit our website at www.ncrec.gov.
Happy New Year!
As we bid farewell to the old year, the North Carolina Real Estate Commission extends warm wishes to all of our dedicated real estate brokers. As you embark on the New Year, it is important to take a moment to celebrate your accomplishments in your real estate career; your dedication and professionalism contributed to the success of real estate brokerage in North Carolina.
During this New Year, the North Carolina Real Estate Commission wishes you a year of prosperity and opportunity. We will continue to support you on your real estate journey by providing educational resources and guidance on regulatory compliance. To that end, while navigating the real estate market, we encourage you to stay informed on License Law and Commission Rules. This will safeguard your professional reputation and demonstrate to the consumer that you possess the knowledge and competency to practice real estate brokerage.
If you have questions about License Law and Commission Rules and permissible brokerage activity, contact Regulatory Affairs at regulatoryaffairs@ncrec.gov or 919.719.9180.
May the coming year bring you joy and success with your real estate endeavors!
Brokers & Consumers Should Beware of Unlicensed Activity in North Carolina
By Len Elder, JD, DREI, Director of Education & Licensing and Janet Thoren, JD, Director of Regulatory Affairs
The North Carolina Real Estate Commission (NCREC) takes its obligation to protect the public from unlicensed activity seriously. Generally, unlicensed activity can be divided into two categories:
- Individuals and entities that do not possess a real estate license and are engaged in real estate brokerage activity in violation of North Carolina General Statutes, and
- Licensed individuals and entities that are engaged in prohibited real estate brokerage conduct with individuals and entities that are not licensed.
The provisions of North Carolina General Statute § 93A-1 prohibit any person or entity from directly or indirectly engaging in the business of real estate brokerage without first obtaining a license. The definition of a real estate broker is contained in §93A-2(a):
Any person…or entity who for a compensation or valuable consideration or promise thereof lists or offers to list, sells or offers to sell, buys or offers to buy, auctions or offers to auction, or negotiates the purchase or sale or exchange of real estate, or who leases or offers to lease, or who offers to sell or offers to sell leases of whatever character or rents or offers to rent any real estate or the improvement thereon, for others.
The General Assembly considers the offense of engaging in unlicensed activity to be serious enough that violation of the statute is a Class 1 Misdemeanor. That status is only one step below a felony. Upon receipt of any complaint regarding unlicensed brokerage activity the Commission’s Regulatory Affairs Division will investigate the matter. The Commission first tries to get unlicensed persons or firms licensed. If that does not work, staff seeks cease and desist consent agreements with those who may be violating state statutes. If Regulatory Affairs is not able to reach such an agreement, enforcement action may be necessary. In civil enforcement cases, NCREC is represented by the Attorney General’s Office to seek an injunction in Superior Court. Criminal enforcement actions are handled by the local District Attorneys’ offices.
Examples of unlicensed activity that may involve these kinds of legal actions would include the following:
1 – Managing Properties Belonging to Another Without a License
A licensed person has become a super host utilizing AirBNB to market and promote their short term vacation rental property. Two friends have asked the super host to market and manage the friends’ AirBNB property as well, and agree to pay the superhost a percentage of the rental bookings.
The advertising, marketing and management of a property belonging to another for compensation requires an active real estate license in North Carolina under General Statute § 93A-2(a). Such activity also requires a signed written property management agreement under Commission Rule 58A .0104.
2 – Wholesaling Brokerage Activities
A real estate license is not required in North Carolina for a bona fide buyer to assign their rights and interests in a purchase contract to a third party. However, the wholesaler may be engaged in unlicensed brokerage activity in violation of the General Statutes if their conduct involves the following activities:
- Soliciting and marketing to sellers that the wholesaler will purchase a property for cash when the wholesaler has no intention of personally purchasing the property, but instead plans to secure buyers for a fee, to purchase directly from the seller;
- Misrepresenting their ownership interest in the property;
- Collecting, handling and delivering due diligence fees and earnest money deposits on behalf of third parties (e.g., the sellers);
- Negotiating purchase contracts between a seller and a buyer;
- Acting on behalf of an investor entity, when the wholesaler is not an officer or W2 employee exempt from licensure under General Statute §93A-2(c)(1);
- Soliciting and marketing of buyers generally, unconnected to the transfer of a specific assigned purchase contract.
There appears to be a belief that working with “investors” or “cash buyers” is somehow exempt from the General Statutes requiring licensure. The statutes make no licensing distinction for a “cash buyer” or an “investor” and create no such exemption for them.
The second major category of unlicensed activity involves licensees engaging in prohibited conduct with unlicensed individuals or entities. General Statute § 93A-6 grants the Real Estate Commission the power to discipline a broker by reprimand, suspension or revocation when the broker engages in prohibited conduct.
Examples that may involve these kinds of prohibited actions would include the following:
1 – Payment of Referral or “Finders” Fees to Unlicensed People or Entities
A broker receives a business referral from a past client who does not have a real estate license. What can the broker legally provide to the past client? A thank you card. It is illegal for the client to receive anything of valuable consideration for the referral and it is illegal for the broker to provide anything of value. Certainly, any type of cash or monetary payment is in violation of the General Statutes, but so is the receipt of a gift card, free movie tickets, a dinner gift certificate or any item that is valuable consideration.
Brokers who share fees with wholesalers based on the wholesaler “representing” or referring/providing a buyer or seller to a licensee can also involve the broker paying unlawful compensation to unlicensed individuals and entities.
2 – Licensees Directing Unlicensed People To Solicit Business
A broker is using an assistant to contact home sellers and potential buyers and to develop leads. The solicitation of buyers and sellers in conjunction with the purchase and sale of real estate that belongs to another person requires a license.
Brokers are permitted to utilize unlicensed assistants for administrative tasks that do not require a license. Prospecting, making cold calls and gathering financial, motivational and confidential information from consumers requires an active license. Such activity rises to the level of first substantial contact as defined in Commission Rule 58A .0104(c), requires the mandatory use of the Working with Real Estate Agents Disclosure, and must be performed by a licensed broker.
3 – Brokerage Services Provided by Inactive or Expired Brokers
When a broker’s license becomes inactive or expired, the broker is required to immediately cease all brokerage activities. A broker whose license status has changed from active status may not continue to work with consumers, even to complete a pending transaction or advise existing clients. The Commission’s database allows for both licensees and the public to check the current license status of a broker.
Brokers-in-charge should adopt policies and procedures that require regularly checking the status of all affiliated broker’s licenses. Those policies should also confirm the status of any licensee prior to the payment of any compensation, including referral fees.
The Commission, in protecting and promoting the interests of the public, needs the help of both licensees and consumers to meet that goal. If you are aware of or concerned about unlicensed activity, you can file a complaint using this link to the NCREC.gov website: https://www.ncrec.gov/complaintform or contact Regulatory Affairs directly at 919-719-9180.
Staff Appearances
Len Elder, Director of Education and Licensing, and Kizzy Crawford Heath, Legal Education Officer, spoke at Canopy REALTOR® Association on November 3.
Dee Bigelow, Consumer Protection Officer, spoke at Greensboro Regional REALTORS® on November 7.
Janet Thoren, Legal Counsel, and Christy Evans, Consumer Protection Officer, spoke at Roanoke Valley Lake Gaston Board of REALTORS® on November 17.
Miriam Baer, Executive Director, spoke at Land of the Sky Association of REALTORS® on November 17.
Brian Heath, Consumer Protection Officer, spoke at Keller Williams Realty Fayetteville on November 28.
Tech Corner: Agent Safety
Working in the field of brokerage can be very rewarding; however, brokers must be diligent about maintaining their safety while practicing brokerage activities. This article will provide brokers with some examples of technology that can be instrumental in aiding broker safety.
Wearable Technology
- Brokers may find it beneficial to wear smartwatches with GPS tracking and emergency alert functionalities so their professional network can be informed of their location and respond immediately when distress is detected.
Communication Applications/Platforms
- Communication and collaboration platforms can assist brokers with sharing real-time information with other agents and their supervisors. Further, mobile applications with secure messaging, video conferencing, and location sharing capabilities can help ensure that brokers remain safe and receive support if they feel unsafe.
Drones
- Drones that are equipped with cameras and sensors may be useful tools to gather information about a property without exposing agents to potential hazards. Before using drones for properties that don’t belong to you or your client, first become familiar with federal, State and local requirements for, and restrictions on, drone use.
The Commission does not endorse the use of specific technology; however, brokers may conduct research or speak with other professionals to determine what technology, if any, may meet their safety needs. Further, when technology is used appropriately, it can allow brokers to remain connected with their professional networks, which can be vital to helping ensure their safety.
If you would like to read more about agent safety, review this resource entitled, “North Carolina Real Estate Agent Safety Guide.”
Diversity, Equity, and Inclusion Updates
Over the last several years the demographic makeup of the real estate consumer has become increasingly more diverse. The North Carolina Real Estate Commission recognizes the need to cultivate a diverse and inclusive real estate industry.
The Commission is developing programs as a part of our ongoing efforts to engage with and attract diverse, and often times underrepresented, groups of professionals to the real estate industry. One of those programs is a college outreach program in which the Commission is partnering with Historically Black Colleges and Universities (HBCUs) in North Carolina. The primary goal of these partnerships is to expose students to, and increase their awareness of, the many career opportunities available in real estate. With the support of other industry entities and organizations, we will accomplish this goal by hosting campus guest speaker series, campus career fairs and other networking opportunities, mentorships, and internships. As the Commission works to develop and implement additional programs, we are always open to your feedback and ideas. If you would like to provide feedback or if you would like to be a part of our programing, please contact us here and Commission staff will be in contact with you.
Case Study: Working With Real Estate Agents Disclosure
FACTS: A broker routinely works with members of their own congregation. The broker has deep personal relationships with the members who are from the same culture and/or nationality as the broker.
While working with a married couple interested in purchasing a residential property, the broker mentions the Working with Real Estate Agents Disclosure. The couple informs the broker that due to their personal, trusting relationship, there is no need to review the disclosure or provide them with a written document. Further, when the couple expresses their interest in purchasing a specific property, they inform the broker that there is no need for a written employment agreement. The couple expresses their satisfaction verbally with the broker and indicates that a written employment agreement is not necessary in their culture.
Later, unrelated problems arose in connection with the buyers’ purchase transaction, resulting in a complaint to the Commission. During the investigation, the clients indicated they were satisfied with the representation the broker had provided to them during the transaction and felt that signing documents to evidence the agreement was unnecessary.
ISSUE: Did the broker comply with Rule 58A .0104, Agency Agreements and Disclosures?
ANALYSIS: No. Rule 58A .0104(a) requires every agreement for brokerage services between a broker and a buyer to be express and in writing and signed by the parties not later than the time one of the parties makes an offer to purchase, sell, rent, lease, or exchange real estate to another. In this scenario, the buyer agent did not enter into a written buyer agency agreement prior to the clients making an offer to purchase the property. The broker did not review the Working With Real Estate Agents Disclosure with the couple at first substantial contact as required under Rule 58A .0104(c).
Rule 58A .0104(c) states that in every real estate sales transaction, a broker shall at first substantial contact with a prospective buyer or seller, provide the prospective buyer or seller with a copy of the publication, “Working With Real Estate Agents,” set forth the broker’s name and license number thereon, review the publication with the buyer or seller, and determine whether the agent will act as the agent of the buyer or seller in the transaction.
Even if a broker believes that they are trusted and that the culture or tradition of consumers with whom they are working, does not require disclosures or written agreements, there is no exception within Commission Rules for such circumstances. The basic requirements of agency disclosure apply to all cultures, religions, and nationalities equally.
Further, it is irrelevant that the client did not want to sign any agreements or review documentation. The Commission expects all brokers to adhere to Rule 58A .0104, Agency Agreements and Disclosure.
Resources:
N.C.G.S. § 93A-6(a), 93A-6(a)(8), § 93A-6(a)(10); and § 93A-6(a)(15)
License Law and Commission Rules 58A .0104,
Articles:
Reminder: Code of Ethics Requirement
Do Commission rules require Code of Ethics Training?
No. The Commission does not require Code of Ethics training. Code of Ethics requirements are set by the National Association of REALTORS® (NAR) for their members. Not all brokers are members of NAR. Brokers who are members of NAR are required to complete Code of Ethics Training once every triennial in order to remain in good standing as a REALTOR®.
The course must include at least 2.5 hours of instructional time and is offered in distance format, via synchronous courses, or in-person. These courses are offered through REALTOR® associations. Some of these courses, if they are at least 4 hours long, may also provide Commission CE elective credit, but only if the course was submitted and approved for CE elective credit with the North Carolina Real Estate Commission. Although a course may have awarded a broker CE credit, NCREC does not certify or approve that the course will be satisfactory to the REALTOR® Association for ethics credit. NCREC does not track or monitor compliance with the ethics requirement.
The only way for a REALTOR® to know if a particular course is sufficient or meets the requirements of the National Association of REALTORS® is to contact your local REALTOR® association.