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The July 20 Commission meeting will be in Durham!
Have you ever wanted to attend a Real Estate Commission meeting to see what happens? If so, please join us at the JB Duke Hotel, 230 Science Drive, Durham, NC in Ballroom AB. We will be welcoming the public in for coffee at 8:30 AM, with the Commission meeting starting at about 9:00. This is a great opportunity to meet the Commission Members and key staff. You are also welcome to stay for a portion or for all of the Commission’s meeting. Mark your calendars for July 20!
Employment Opportunities Available
Are you interested in joining the staff of the North Carolina Real Estate Commission? From time to time, employment opportunities become available. They are posted on the Commission’s website under the “About Us” tab.
Click here for more information.
Staff Appearances
Miriam Baer, ExecutiveDirector, spoke at the NC REALTORS® Mobile Monday meeting on June 6.
Steve Fussell, Chief Consumer Protection Officer, spoke at the Raleigh Association of REALTORS meeting on June 9.
My license is expired! How do I reinstate it?
To maintain a current license, brokers must renew their license annually between May 15 and June 30. The license of a broker who fails to renew during that period will expire on June 30, and that broker must cease all brokerage activities immediately.
What steps must a broker take to reinstate an expired license? That answer depends on how long the license has been expired.
To reinstate a license expired for less than 6 months:
- go to the Commission’s homepage (www.ncrec.gov);
- click on Reinstate your License;
- enter your license number and PIN (last 4 of your SSN unless you have changed it);
- answer required questions; and
- pay the $90 reinstatement fee.
NOTE: To regain active status, a License Activation / Affiliation form (REC 2.08) also must be submitted.
To reinstate a license expired for 6 months but no more than 2 years:
- Successfully complete one 30-hour Postlicensing course (course must be completed within 6 months prior to submitting reinstatement application); and
- Submit a reinstatement application with the $90 application fee and all required documentation, including criminal background report;
-OR-
- Submit a reinstatement application with the $90 application fee and all required documentation, including criminal background report; and
- Pass the National and State sections of the license exam.
NOTE: To regain active status, a License Activation / Affiliation form (REC 2.08) also must be submitted.
To reinstate a license expired for more than 2 years:
- Successfully complete the 75-hour NC Broker Prelicensing course;
- Submit a license application with the $100 original application fee and all required documentation, including criminal background report; and
- Pass the National and State sections of the license exam.
NOTE: You will be licensed as a provisional broker and be subject to the 90-hour Postlicensing education program. To gain active status, a License Activation / Affiliation form (REC 2.08) also must be submitted.
For more information, review Commission Rule 58A .0505 or visit the “Reinstate your License” page on the Commission’s website. You may also contact the Commission’s Education & Licensing Division at LS@ncrec.gov or 919-875-3700.
Employment Opportunities Available
Are you interested in joining the staff of the North Carolina Real Estate Commission? From time to time, employment opportunities become available. They are posted on the Commission’s website under the “About Us” tab.
We currently have opportunities available for the following positions:
Director of Education and Licensing
Auditor – Application Deadline June 28, 2022
Consumer Protection Officer – Application Deadline June 27, 2022
Network Administrator – Application deadline July 5, 2022
Click here for more information.
Staff Appearances
Sheryl Graham, Consumer Protection Officer, spoke at the REMAX United office meeting on May 17.
Steve Fussell, Chief Consumer Protection Officer, spoke at the Showcase Realty LLC meeting on May 18.
Shanna Hardy, Consumer Protection Officer, spoke at the REMAX Leading Edge office meeting on May 25.
Disciplinary Actions
CESAR AUGUSTO OSORIO (ARDEN) – The Commission accepted the voluntary surrender of the broker license of Cesar Osorio effective May 18, 2022. The Commission dismissed without prejudice allegations that Mr. Osorio violated provisions of the Real Estate License Law and Commission rules. Mr. Osorio neither admitted nor denied misconduct.
The July 20 Commission meeting will be in Durham!
Have you ever wanted to attend a Real Estate Commission meeting to see what happens? If so, please join us at the Have you ever wanted to attend a Real Estate Commission meeting to see what happens? If so, please join us at the JB Duke Hotel, 230 Science Drive, Durham, NC, in Meeting Room C at 9 a.m. You are welcome to stay for a portion or for all of the Commission’s meeting. Mark your calendars for July 20!
The Pitfalls of Using Escalation Clauses
Stephen L. Fussell, Chief CPO
In an effort to gain a competitive advantage, some prospective buyers may ask their agents to include escalation clauses in their offers. An escalation clause is one in which a prospective buyer expresses their willingness to pay a specific amount more than the highest competing buyer. The escalation clause may or may not indicate a maximum amount that the prospective buyer is willing to pay.
The Commission discourages the use of escalation clauses. Commission Rule A .0115 reads as follows: “A broker shall not disclose the price or other material terms contained in a party’s offer to purchase, sell, lease, rent, or to option real property to a competing party without the express authority of the offering party.” How does this rule impact escalation clauses? Assume, for example, that Buyer #1 offers to pay $1,000 more than any other offeror. In order to establish the price that Buyer #1 will pay, the brokers involved would have to share the terms of the highest offer with Buyer #1. Sharing these terms is prohibited except in the unlikely event that the other buyer consents to it.
Pitfalls of escalation clauses:
- If a buyer submits an offer containing an escalation clause without knowing the price and terms of the other offers and without specifying a maximum price, the buyer may end up paying much more for the property than desired.
- If a buyer includes a maximum price in an escalation clause, the seller will immediately know the buyer’s top price thereby compromising the buyer’s bargaining position.
- An offer containing an escalation clause may not become enforceable until a specific price is entered into the contract and the buyer sees the price the seller has specified.
- The seller may fabricate a fictitious offer in order to drive up the sales price for a buyer who uses an escalation clause.
- Real estate brokers are prohibited from drafting escalation clauses, because doing so would constitute the unauthorized practice of law. Hiring an attorney is recommended, but will increase the buyer’s costs. The seller should also have an attorney review an offer containing an escalation clause to protect the seller’s interests. Note that the use of an attorney-drafted escalation clause does not relieve the listing firm and its agents from obtaining the express authority of a competing buyer to disclose the terms and conditions of the competing buyer’s offer as required by Rule A .0115. If the competing buyer refuses to give such authorization, then disclosing the terms of the competing offer would violate this rule and subject a licensee to possible disciplinary action even if the clause were drafted by an attorney.
- If multiple buyers were to include escalation clauses in their offers, a bidding war may follow. If no buyer is willing to commit to a specific price, then no contract is ever formed and no property is sold.
- Since the use of an escalation clause implies that a prospective buyer is willing to pay more than other buyers, it may motivate sellers to seek higher prices, a disadvantage to the buyer using the escalation clause.
- While the use of escalation clauses may lead to higher sales prices, a benefit to the sellers, they could also discourage buyers who do not want to use escalation clauses and risk violation of a Commission rule. The use of escalation clauses may also lengthen the negotiation process, a potential disadvantage to sellers and buyers.
- The buyer who is unsuccessful in a negotiation where a competing buyer used an escalation clause may feel that they were treated unfairly. The perception of unfair treatment may discourage the buyer from purchasing property in the future and may lead the buyer to file complaints against the brokers involved in the transaction.
- A broker who discloses the price/terms of an offer without the buyer’s consent or otherwise gives one party an unfair advantage over another risks disciplinary action by the Commission.
A seller’s best response in a multiple offer situation where one or more of the buyers is using an escalation clause will likely be to invite all buyers to make their highest and best offers. That way, each buyer is given an opportunity to buy the property at the price and terms they are willing to pay and the seller will receive the best offer from each buyer rather than an incremental offer from a buyer who wants to offer slightly more than a competing buyer.
Escalation clauses tend to focus on price. Listing agents should exercise care to advise seller-clients to consider more than the sales price in an offer. An offer from a well-qualified buyer who offers a lesser amount may be a wiser choice than a higher offer from a less-qualified buyer. Similarly, an offer from a buyer who has visited the property may be preferred over one who offers a high price sight unseen.
Brokers who choose to use escalation clauses should proceed with extreme caution. Real estate transactions are complex even without such clauses. Real estate transactions in busy markets with low inventory can be even more frantic. Escalation clauses may introduce confusion, anxiety, frustration and fraud. For these reasons, the Commission discourages their use.