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Dual Agency – Authorization, Disclosure and Safeguarding Confidential Information

By Stephen Fussell, Chief CPO

         An agency agreement is an agreement between a real estate firm (or sole proprietorship) and its client – a buyer, seller, landlord or tenant. The agreement usually describes the relationship between the firm and its client, specifies the services to be provided by the firm, describes any obligations of the client, and indicates how the firm will be compensated for its services.

            A real estate firm’s relationship with a client also determines the relationship of the firm’s affiliated brokers with the client. See the following examples:

            Many firms endeavor to sell their own listings and therefore offer dual agency as a way to achieve this goal. If your firm offers dual agency, then you must obtain the client’s express, written authorization for the firm and its affiliated brokers to act as a dual agent. Ideally, this written authorization will be included in the listing agreement and in the buyer agency agreement.

            Additionally, as soon as you learn that the other party in the transaction is also represented by your firm, you must disclose this fact to your client. Remember, you must obtain your client’s authorization to act as a dual agent before a dual agency situation occurs, and then disclose to your client when dual agency arises. Example: An offer is submitted by a buyer who is represented by the listing firm. Even if the agency agreements for both parties authorize dual agency, the listing agent must clearly disclose the dual agency situation when presenting the offer to the seller.

            If a buyer or seller has concerns about the inherent conflict of interest posed by dual agency and, if your firm offers designated dual agency, then the client may request designated dual agent. While this will commonly be noted in the agency agreement, a separate written agreement addressing the type of agency the firm and client have agreed to may be used. However, a broker who has received confidential information about one party cannot be designated to represent the other party. Remember, in order for a firm to provide designated dual agency in a transaction, both parties must agree to designated dual agency. And, a firm cannot designate a broker to represent one party without also designating a different broker to represent the other party.

            Firms that offer either form of dual agency (designated or non-designated) must exercise great care to safeguard the confidential information received from its clients. A designated dual agent who accidentally receives confidential information regarding the other party in a transaction which could affect their client’s decisions regarding that transaction must share the information with their client. While the sharing of this information may be detrimental to the other party in the transaction, the designated broker’s fiduciary duty requires him or her to disclose any information that could affect their client’s decision-making. It is therefore imperative that firms practicing dual agency and/or designated dual agency have clear, strictly-enforced policies and procedures for protecting clients’ confidential information to prevent accidental disclosures of confidential information.

RESPA Case Study: Is This Activity Permissible?

A brokerage offers a Lunch and Learn continuing education course for brokers. In exchange for referrals from the brokerage, a local property surveyor pays the brokerage the full cost of the luncheon for all attendees, but does not advertise its services during the course.

Question: Is this a violation of RESPA?

Answer: Yes, this is a violation of RESPA. The property surveyor has given a “thing of value” to the brokerage when they reimbursed the brokerage for the cost of the luncheon. The property surveyor and the brokerage could be held responsible for the RESPA violation. However, if the property surveyor attends the Lunch and Learn and makes a presentation or otherwise markets their services, the reimbursement may be lawful under RESPA

The Consumer Finance Protection Bureau has a multitude of resources that can assist you with understanding what activities are permitted and prohibited under RESPA. You can access the resources here.

If you have questions regarding whether or not an activity violates RESPA, please consult with an attorney.

Continuing Education: The Clock is Ticking!

Have you taken your continuing education courses yet? Do you know which continuing education courses you need to take?

Rule 58A .1702 requires brokers to complete eight credit hours of real estate continuing education courses within one year prior to the expiration of the license as follows:

In other words, a broker must take the appropriate continuing education course for their license status. For example, a broker must take the BIC Update Course if they hold BIC Eligible status; if a broker does not have BIC Eligible status, they must take the General Update Course. Be aware that a broker with BIC Eligible status who takes the General Update Course and an elective will maintain an active license but will lose BIC Eligible status (and, in turn, BIC designation).

For more information or to ask a question, contact the Education and Licensing Division at 919.875.3700 or educ@ncrec.gov.

The April 2023 Commission Meeting will be in Edenton, NC!

The North Carolina Real Estate Commission is pleased to announce that it will be holding its April 19-20, 2023, business meeting and hearings in Edenton, North Carolina. You are cordially invited to join the Commission members for coffee on Wednesday, April 19th at 9:00, before the meeting begins, and to stay or attend the meeting at any time throughout the day.

The business meeting is expected to begin Wednesday at 9:30 and to last until mid-afternoon.

The meeting will be held at:

Historic 1767 Chowan County Courthouse

117 East King Street

Edenton, NC 27932

The Commission members welcome the opportunity to meet you and hear your thoughts. While not required, we will appreciate your RSVP by April 12th to exec@ncrec.gov for planning purposes.

We look forward to seeing you in Edenton!

Staff Appearances

Jean Hobbs, Auditor/Investigator and Lyndi James, Auditor, spoke at the REMAX Advantage meeting on February 7.

Fred Moreno, Chief Deputy Legal Counsel, and Kristen Fetter, Deputy Legal Counsel, spoke at the Longleaf Pine REALTORS Association meeting on February 21.

Bruce Rinne, Information Officer, spoke at the Greenridge Realty meeting on February 21.

Jean Hobbs, Auditor/Investigator, spoke at the Charlotte NARPM Chapter and Triad NARPM Chapter meeting on February 23.

Diversity, Equity, and Inclusion Updates

International Women’s Day

Each year on March 8 we celebrate International Women’s Day.

International Women’s Day (IWD) is a global holiday that grew out of efforts to promote women’s rights in the early 20th century. On IWD, we celebrate the social, economic, cultural, and political achievements of women. While we recognize, and celebrate, the progression in advancing women’s rights we must also acknowledge that there is still work to do. Everyone everywhere can play a part in continuing to forge women’s equality.

In recognition of IWD, we’d like to highlight some data on women in real estate. According to the National Association of REALTORS (NAR), women have comprised the majority of REALTORS since 1978 and as of 2021, represent 65% of their membership.

Disciplinary Actions

KASSIEM S. CARTER (RALEIGH) – Following a hearing, the Commission permanently revoked the broker license of Carter effective November 29, 2022. The Commission found that, in an unrelated case, Carter consented to the voluntary surrender of his licensed firm’s broker license and the active suspension of his license. Following the license surrender and suspension, Carter knowingly continued conducting property management services through an unlicensed firm and without being designated as, or affiliated with, a broker-in-charge.

BRANDEN BONNETT (CHARLOTTE) – Following a hearing, the Commission permanently revoked the broker license of Bonnett effective December 6, 2022. The Commission found that Bonnett performed brokerage services as a provisional broker while he was unaffiliated, made misrepresentations to clients regarding the status of mortgage loans and contracts, made misrepresentations to brokers regarding the payment of due diligence fees, and forged client signatures on a contract and on addenda.

SANDRA PAGANO (MOREHEAD CITY) – The Commission accepted the voluntary surrender of the broker license of Pagano effective January 19, 2023. The Commission dismissed without prejudice allegations that Pagano violated provisions of the Real Estate License Law and Commission rules. Pagano neither admitted nor denied misconduct.

STEVE SAIEED (GREENVILLE) – The Commission accepted the voluntary surrender of the broker license of Saieed effective February 15, 2023. The Commission dismissed without prejudice allegations that Saieed violated provisions of the Real Estate License Law and Commission rules. Saieed neither admitted nor denied misconduct.

ISAAC TYNDALL (MYRTLE BEACH) – The Commission accepted the voluntary surrender of the broker license of Tyndall effective February 15, 2023. The Commission dismissed without prejudice allegations that Tyndall violated provisions of the Real Estate License Law and Commission rules. Tyndall neither admitted nor denied misconduct.

JUDITH CARVER (ASHEVILLE) – The Commission accepted the voluntary surrender of the broker license of Carver effective February 15, 2023. The Commission dismissed without prejudice allegations that Carver violated provisions of the Real Estate License Law and Commission rules. Carver neither admitted nor denied misconduct.

JAMES EARL RAY FISHER (FAYETTEVILLE) – The Commission accepted the voluntary surrender of the broker license of Fisher effective February 15, 2023. The Commission dismissed without prejudice allegations that Fisher violated provisions of the Real Estate License Law and Commission rules.  Fisher neither admitted nor denied misconduct.

STONE GABLES PROPERTY (FAYETTEVILLE) – By Consent, the Commission reprimanded Stone Gables Property, effective January 19, 2023. The Commission found that in May 2022, Stone Gables Property entered into an exclusive right to sell listing agreement with the sellers of certain real property. The sellers accepted an offer to purchase and contract that required the buyers to remit a due diligence fee. The buyers did not immediately remit this fee. Upon advice from the broker-in-charge and listing agent affiliated with Stone Gables Property, the sellers accepted a second offer to purchase and contract without properly terminating the first contract.

ALEXANDRA REGINA HUNT (CHARLOTTE) – By Consent, the Commission suspended the broker license of Hunt for a period of 12 months, effective February 1, 2023. The Commission found that Hunt acted as the buyer’s agent for an out of state buyer purchasing property sight-unseen. Hunt failed to complete agency agreements with accurate dates and signed the buyer agency agreement after the transaction had closed. Hunt failed to ensure requested repairs were agreed upon in writing and completed. Hunt advertised using a name which is not the broker’s legal name or on file with the Commission. Hunt failed to respond to repeated Letters of Inquiry from Commission staff.

Tech Corner: Say Good-Bye to Paper Renewal Notices!

Did you receive a postcard reminder to renew your real estate license last year? Did you receive it after you renewed your license? Well, guess what? Postcard renewal notices will no longer be sent to brokers via the US mail. In an effort to ensure brokers receive timely reminders to renew their licenses, the Commission will now send renewal notices via electronic communication.

Therefore, brokers must ensure a current, valid email address is on file with the Commission pursuant to Rule 58A .0103(c). Due to the elimination of paper renewal notices, it is imperative that brokers login to their license record and verify the validity of their email address.

Brokers may enter a public or private email address in their license record. However, if the email address is designated as public, this information is available to the general public. If the broker designates the email address as private, the email address is only available for the Commission to use when sending correspondence.

Furthermore, brokers should not enter an office email address that is shared with others in their brokerage. Brokers, keep in mind that if you are the qualifying broker for your firm, your public email address is also the email address for the firm. A qualifying broker cannot have a public email address that is different from their firm.

If you have any additional questions, you may contact the Education and Licensing Division at educ@ncrec.gov or 919.875.3700.

Current Stats: Monthly Licensee Count as of February 1, 2023

Broker Misconduct, the Root of the Problem

Stephen L. Fussell, Chief CPO

            The Commission’s mission is to protect consumers in real estate transactions. We strive to fulfill that mission with education and enforcement. We educate brokers before they become licensed and throughout their careers. We also educate consumers to enable them to make informed decisions.

            Enforcement occurs when someone files a complaint against a broker. We investigate the complaint to determine whether there is evidence of a violation of the Real Estate License Law by the broker (and/or the broker’s broker-in-charge, aka “BIC”).  If we find such evidence, we determine whether disciplinary action is warranted. Enforcement has several purposes: (1) to educate brokers regarding best practices, (2) to remove or otherwise discipline brokers who are unable or unwilling to comply with the License Law, and (3) to deter other brokers from engaging in improper conduct.

            The Commission’s brochures, eBulletin articles, continuing education courses, and the Issues & Answers Course focus on topics that often generate complaints and lead to disciplinary action, such as the omission or misrepresentation of material facts, trust account violations, conflicts of interest, failure to properly establish agency relationships, etc. However, it seems that, no matter how many times we cover these topics, we continue to get complaints about the same issues. Therefore, this article will take a different approach and examine the root causes of broker misconduct.

1. Dishonesty – any unfair or deceptive act intended to take advantage of another person for personal gain. There is no place for dishonesty in real estate. Consumers must be able to trust brokers and brokers must conduct themselves in a trustworthy manner in order for transactions to go smoothly and to prevent harm to consumers.

Some examples include:

Solution for dishonesty: always act in your client’s best interest, disclose material facts that you know or reasonably should know, and treat others fairly and honestly.

2. Ignorance/Incompetence – a lack of knowledge, skills, and/or understanding of the License Law and the Commission’s rules, resulting in a broker who does not have the required knowledge or skill to achieve the client’s goal.

Some examples include:

Solution for ignorance/incompetence: education and mentoring. Ignorance is no excuse. The Commission offers lots of materials on many topics. If we don’t have information on a particular topic, check with NC Realtors if you are a member and/or search online from reputable sources. Take continuing education courses on the topic or area of practice you wish to pursue. In addition, before attempting to handle a type of property or transaction that is new to you, find someone with experience to mentor you or simply refer the client to an experienced broker in exchange for a referral fee. The goal should always be to achieve the best outcome for your client. In order to ensure competence within a firm, a BIC must establish policies and procedures for training and supervising broker associates, especially provisional brokers.

3. Willful non-compliance – when a broker knows or reasonably should know the Real Estate License Law, the Commission’s rules, and any other law or regulation involving real estate, such as the Vacation Rental Act, Tenant Security Deposit Act, etc., but chooses not comply with the regulation.

Some examples include:

Solution for willful non-compliance: know and comply with the License Law, the Commission’s rules, and other laws and rules affecting your real estate transactions. As a real estate licensee, you are expected to be diligent in understanding and complying with the Real Estate License Law and the Commission’s rules. While the law and rules are designed to protect consumers, following them will also protect you, the broker. When in doubt regarding the meaning of any real estate law or rule, call the Commission for clarification at 919-875-3700 for license issues, or 919-719-9180 for transaction issues. Asking questions before taking action will often yield a better outcome than asking questions after a problem has arisen. As noted above, in order to ensure compliance, a BIC must establish and enforce policies and procedures for training and supervising broker associates, especially provisional brokers.

            All of the examples referenced in this article are taken from actual cases. Any of these examples can lead to disciplinary action. If you see broker misconduct, say something to the broker engaging in the misconduct, or to your BIC, and/or to the other broker’s BIC. Contact the Commission’s Regulatory Affairs Division and/or your local Board of Realtors, if you would like to make a formal complaint.

            Firms or offices sometimes have a difficult time policing themselves and should consider how best to train and support broker associates who are working remotely to use best practices. Company policy manuals should include policies and procedures for identifying and documenting misconduct by brokers affiliated with the firm or office. BICs must be diligent in enforcing company policies as well as ensuring compliance with the License Law and Commission rules.

            If you are a BIC of a firm/office where a broker associate has displayed any of the three root causes of misconduct described in this article and you have exercised your best efforts to bring the broker associate into compliance with the License Law and/or your firm’s policies and procedures, then it would be prudent to consider terminating that broker associate to reduce your liability, to protect your firm’s reputation, to protect your firm’s clients and customers, and to establish a corporate culture that inspires your firm’s other broker associates to conduct themselves professionally and with honesty and integrity at all times.

            The real estate industry depends heavily upon consumers. Consumers will not hire brokers they do not trust. Trust must be earned through many successful transactions. As an industry, we need to do all that we can to earn consumer trust by ensuring that consumers’ interests are protected. If you want to succeed in real estate, honesty, integrity, and a lifelong pursuit of knowledge and skills will serve you well.