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Tech Corner: Electronic Signatures
Does Your Use of Electronic Signatures Comply with License Law & Commission Rules?
- Do you know what is an electronic record or electronic signature?
- Are you retaining the electronic record and signatures pursuant to License Law and Commission rules?
- How can you document the necessary requirements?
The law that governs the use of electronic records and electronic signatures is called North Carolina’s Uniform Electronic Transactions Act (hereafter referenced as “UETA”) and can be found in NCGS § 66-311 et. seq. UETA has a few exceptions, but it applies to electronic records and electronic signatures in the conduct of a transaction including a real estate transaction.
According to G.S. 66-314, UETA applies to any electronic record or electronic signature created, generated, sent, communicated, received or stored on or after October 1, 2000. This law further makes the use of electronic records and signatures legal so long as the parties agreed to use electronic means.
Question: What is considered an electronic record?
Answer: An electronic record is any information on a tangible medium that is created, generated, sent, communicated, received, or stored by electronic means.
Question: What is considered an electronic signature?
Answer: The UETA defines an electronic signature as a:
- sound, symbol or process,
- attached to, or logically associated with a record,
- executed or adopted by a person with the intent to sign the record.
Further, the UETA requires all three elements to be present to constitute a valid electronic signature.
Question: How long does an electronic record need to be retained according to the UETA?
Answer: The UETA does not specify the minimum amount of time electronic records must be retained. However, it states that record retention requirements imposed by other laws will be satisfied by retaining an electronic record that (1) accurately reflects the information set forth in the record at the time it was generated as an electronic document, and (2) remains accessible for later reference.
Question: Does the Commission require brokers to retain electronic records?
Answer: Yes. License Law and Commission rules require brokers to retain all records related to a transaction regardless of the format of the original record(e.g. hard-copy or electronic) The Commission does not require any specific format of record retention so long as the records are legible and available upon request. A broker is required to retain all records for a least three years following:
- the conclusion of the transaction, or
- termination of the broker’s agency relationship, and
- disbursement of all trust monies related to that transaction held by the broker, whichever occurs last.
Therefore, brokers must ensure that they retain all of their electronic records using the management software of their preference pursuant to the record retention requirements under Commission Rule 58A .0108.
Question: Is obtaining an electronic signature satisfactory to prove the document was reviewed with the client and explained by the broker?
Answer: Not necessarily. Most electronic signature tools such as DotLoop or Docusign simply indicate where the client needs to place signatures or initials, but Commission Rule 58A .0104, for example, requires that a broker provide AND REVIEW the Working With Real Estate Agents Disclosure. Agency principles require the review and explanation of all documents signed by the client. Brokers should also retain accompanying emails and notes that indicate they met these obligations, not just proof that the client signed the document. If you have any further questions or comments, please contact the Commission at 919-875-3700 or educ@ncrec.gov.
Reminder: Have you completed your Postlicensing Education?
Are you a provisional broker? If so, have you completed your 90-hours of Postlicensing education?
A provisional broker must complete all 90 hours of Postlicensing education within 18 months of their initial licensure date pursuant to Commission Rule 58A .1902(b). The initial licensure date is determined by the date the license is issued, whether or not the provisional broker ever activated it. Further, a provisional broker must complete all 3 Postlicensing courses by the deadline to remain eligible for an active NC real estate license.
Postlicensing courses must be completed (including successfully passing the end-of-course examination) within 180 days of enrollment. If a provisional broker purchases a Postlicensing education package (e.g. 3 courses from an Education Provider), the provisional broker should take the end-of-course examination after completing each course. If provisional brokers delay taking the examinations until the completion of all 3 courses, they run the risk of their 180-day courses expiring before all 3 exams can be scheduled or passed.
If all 3 Post courses have not been successfully completed within 18 months of initial licensure, the provisional broker’s license will be placed on inactive status until they have completed the requirements for reactivation of their license. Further, Commission rules do not allow for an extension of time for any reason to complete Postlicensing education.
Do you need to schedule your Postlicensing courses? A list of Education Providers who offer self-paced, distance, in-person, synchronous, or blended delivery Postlicensing courses can be found on the Commission’s website by clicking here. If you have further questions or comments, please contact the Education and Licensing Division at 919.875.3700 or email educ@ncrce.gov.
The January 2023 Commission Meeting will be in Wilmington!
The North Carolina Real Estate Commission is pleased to announce that it will be holding its January 18-19, 2023, business meeting and hearings in Wilmington, North Carolina. You are cordially invited to join the Commission members for coffee on Wednesday, January 18th at 8:30, 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 9:00 and to last until mid-afternoon.
The meeting will be held at:
EMBASSY SUITES WILMINGTON RIVERFRONT – SALON I
9 ESTELL LEE PLACE, WILMINGTON
The Commission members welcome the opportunity to meet you and hear your thoughts. While not required, we will appreciate your RSVP by January 11th to exec@ncrec.gov for planning purposes.
Fake Seller / Fake Buyer Scam Alerts
By Tiffany Ross- Consumer Resource Officer & Bruce Rinne- Information Officer
The North Carolina Real Estate Commission has been receiving an increasing number of calls about fraudulent buyers and sellers attempting to scam innocent people, attorneys, and lenders out of due diligence fees, properties, or mortgage payoffs. These scam artists can be located anywhere in the world, yet claim they are local. Here are a few recent examples of calls we received, red flags to alert you to a potential scam, and potential action you can take to reduce risk.
FSBNO – For sale by NOT the owner
A neighbor was driving by a parcel of land adjacent to their own and noticed a For Sale By Owner sign but did not recognize the phone number on the sign. Suspicious, the neighbor, who knew the property owner, called the owner with the phone number the neighbor already had and asked if they were selling. The owner said ‘No’ and called the police to take down the sign and investigate.
Action you can take:
- If your client is interested in an FSBO, while you may not be able to verify that the phone number on the sign is correct, you can look up the owner of record on the county tax website and/or register of deeds website. You can also ask the purported owner for photo identification to ensure it matches the public record.
- If the purported owner will not identify themself, or they get angry or rude with you for your due diligence efforts, this is a red flag that a scam may be in the making. You can report your concern to local law enforcement (Sheriff/Police), and advise your clients to beware, make further investigation, and/or move on.
Fake Seller Contacting Listing Agents
A listing agent received a call from the purported owner of a vacant lot located in a new subdivision about listing their lot. The listing agent did their due diligence by pulling the deedto verify that the names matched, and then sent the listing agreement for digital signatures. Once the signatures were received, the agent put their sign in the yard. As luck would have it, again a neighbor was suspicious. After calling the rightful owner, the listing agent learned that the property was not for sale. The rightful owner showed up, called the agent on the sign and had the sign removed 3 days after the listing was posted.. Later that day the property was relisted with another broker who put their sign in the yard. Again this second listing broker was alerted to the fraud and removed their sign. The property owners now look daily to see if the property is listed for sale either on the MLS or on various websites.
Action you can take:
- If you are contacted by someone claiming to own land, take steps to verify the person you are communicating with matches the person on the deed. Ask for photo identification and get a copy for your records. (See #1 and #2 above).
- When listing a property, check the history and contact the previous listing agent/firm if something seems strange about the listing (short time on market, sudden withdrawal) to see if there may be fraud or material facts that need to be disclosed.
- If you encounter a property owner that has been a victim of multiple attempts to sell their property without their consent, encourage them to contact the following:
- FBI – to report the fraudulent activities and get assistance in stopping the perpetrator. https://www.fbi.gov/how-we-can-help-you/safety-resources/scams-and-safety
- NC Attorney General – Fraud Hotline (877) 5NO-SCAM. https://ncdoj.gov/
Fake Buyer Dodging Due Diligence Fee Payment
A homeowner receiving a job transfer listed their home for sale. The seller received a full price offer the first day with a quick closing. The seller contracted to sell the property and immediately contracted to purchase a home in their new town and submitted a Due Diligence fee equal to the amount of Due Diligence payment they were to receive from their home sale. The buyer made one excuse after another and the Due Diligence payment never came. The seller was told that the buyer was sorry and offered to raise the price $25,000 if the seller would wait until the closing to get the Due Diligence fee. When the seller went to the attorney’s office to sign the settlement documents, the seller learned that the buyer wasn’t real and was trying to get the attorney to wire the proceeds of the sale to them. The seller was unable to purchase their new house, lost the Due Diligence fee they had paid, and was in serious danger of losing their job because they did not relocate. With the loss of the Due Diligence fee on the new home, the seller also was unable to make their next few mortgage payments.
Action you can take:
- As a real estate broker, part of your job is to advise your client about their options to help protect them in their real estate transaction. While you cannot force a client to take your advice, recommend best practices for their protection, preferably in writing. A prudent real estate broker would recommend the seller-client ensure they have the due diligence funds in hand before spending additional money on a new property.
- A prudent broker would be careful to ask for proof of funds, or prequalification information for the seller’s consideration prior to acceptance of an offer. If unable to verify, the broker should inform the seller and warn them of the possible outcomes if the buyer cannot perform.
Fake Seller Disappears After Receiving Due Diligence Fee
Someone claiming to own a property listed the property for sale and got multiple offers during the ‘Coming Soon’ period. A buyer went under contract and delivered a large Due Diligence fee that was wired to the seller’s account. The “seller” was never heard from again.
Action you can take:
- Verify the seller/client’s identity as mentioned above. While it is the listing agent’s duty to take reasonable steps to verify the identity of their client, if a red flag arises as to an owner’s identity, buyer agents can help protect their buyer client by requesting proof of seller identification from the listing agent, and verifying the name(s) against public records.
- While brokers should not be involved in the transfer of funds, they should make every effort to educate clients on the dangers of wire fraud.
- Be aware that there are specific, intentional, and targeted attacks against buyers and sellers happening more and more frequently. Educate your clients and explain why you are taking more precautions for their safety and protection as well as your own. If you suspect something may be amiss with either the buyer or seller, do more investigation. A broker may wish to verify the identity of their client or the other principal by making sure they have the proper ID to be able to close. Available tools for this include a Google search of their name and the address, researching the obituaries, contacting neighbors, and checking social media sites like Linked-In and Facebook.
- As always, protect your principal’s personal information, such as social security number or bank account numbers.
Other Red Flags or statements to look out for:
1. The buyer/seller is traveling on vacation (sometimes abroad), claims they cannot meet in person, and has to do everything by email.
2. The seller has a family emergency, needs a quick cash sale, and will accept substantially less than full price if they can close in a very short time.
3. The email address or phone numbers are from another country. Of course, there are legitimate buyers and sellers who live overseas, but this does raise a flag that should be checked.
4. The photo IDs, such as drivers’ licenses or passports, are barely legible.
5. The Seller does not require a Due Diligence fee and/or low or no Earnest Money combined with a quick closing (in order to obtain quick proceeds before a scam is discovered).
6. The buyer/seller makes constant excuses, is not able to perform the terms of the contract, or is not returning paperwork.
7. The buyer/seller gets very angry at the broker as the transaction gets closer to closing and applies pressure on the broker to make sure the deal goes through. Sometimes they offer an incentive such as commission bonuses or promising other opportunities to buy or sell.
Remember to protect yourself and your client by asking questions and doing research when faced with red flags.
Staff Appearances
Janet Thoren, Director of Regulatory Affairs, Len Elder, Director of Education and Licensing, and Mike Gray, Chief Auditor, spoke at the North Carolina Association of Realtors Convention on October 18.
Janet Thoren, Director of Regulatory Affairs, Kristen Fetter, Deputy Legal Counsel, Mike Gray, Chief Auditor,and Chad Wilson, Auditor-Investigator, spoke at the ARELLO Regulatory Investigator Seminar on November 1-3.
Fred Moreno, Chief Deputy Legal Counsel, spoke at the Greensboro Regional REALTORS meeting on November 1.
Sheryl Graham, Consumer Protection Officer, spoke at the Keller Williams Realty office meeting on November 9 and at the Brunswick County Association of REALTORS office meeting on November 17.
Bruce Rinne, Information Officer, Brian Heath, Consumer Protection Officer, spoke at the Longleaf Pines REALTOR Association meeting on November 22.
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.
The Real Estate Commission is currently searching for an attorney to serve as Associate Legal Counsel II to prosecute cases before the Commission involving allegations of violations of the Real Estate License Law and Commission rules.
Click here for more information.
Disciplinary Actions
JOSEPH DAVID CANDELARIA (CONCORD) – By Consent, the Commission suspended the broker license of Candelaria for a period of 6 months, effective December 1, 2022. Commission found on February 4, 2022, Candelaria timely submitted a criminal conviction form reporting four felony convictions of possession of marijuana, but failed to timely respond to two Letters of Inquiry. Candelaria failed to report four additional drug related misdemeanor convictions in 2016 as well as a probation violation.
ANDREA VACAFLOR AYOROA (CHARLOTTE) – By Consent, the Commission reprimanded Ayoroa, effective December 1, 2022. The Commission found that in or around February 2022, Ayoroa acted as a buyer’s agent for a client who contracted to purchase a vacant lot. After the termination of the contract, Ayoroa’s buyer-client filed a complaint with the Commission against the listing agent. During the course of the investigation of the initial complaint, Ayoroa failed to timely provide a substantive response to multiple Letters of Inquiry.
CHRISTINE D COX (HICKORY) – By Consent, the Commission suspended Cox for ninety (90) days, effective September 20, 2022. The Commission found that Cox acted as a listing agent for residential property located on a lake and included a boat dock. After the property went under contract, it was discovered that the boat dock lacked a tag and it was further discovered that the boat dock was not permitted. The buyers terminated the contract a few days later without expending any funds. Respondent disclosed the lack of permit issue to the next buyer. During the course of the investigation, Cox failed to timely reply to multiple letters of inquiry.
Technology Survey: Will You Help Us Help You?
Do you rely on technology to conduct your brokerage activities? Have the advancements in technology made you feel like you have been left behind?
The Commission is aware that technology has consistently impacted the practice of real estate brokerage over the past several years. Some brokers have expressed their frustration about the challenges they face while conducting brokerage activities.
In an effort to determine the need for educational materials to meet the technology needs of brokers in North Carolina, and the best source of those materials, the Commission is asking for your assistance in completing a survey. This survey will take approximately 3-5 minutes to complete and your responses will remain anonymous. The Commission values the input of the brokerage community and would like to thank you in advance for your participation.
The deadline for survey submission is Monday, December 12, 2022.
You can access the survey here.
If you have any further questions or comments, please contact the Education and Licensing Division at 919.875.3700 or educ@ncrec.gov.