Don’t Delay Your Postlicensing Education

Provisional brokers need to be more prompt than ever in taking their required postlicensing education. With the sharp decline in license applicants over the past two years, there are substantially fewer provisional brokers needing these courses than in the past. This means that the demand for the courses is much lower and sponsors are not only scheduling fewer course offerings but also are frequently having to cancel scheduled courses due to a lack of sufficient enrollment. Consequently, provisional brokers who wait to take a needed course until 90 days or less prior to their deadline are either having difficulty finding a course or having to travel farther to get a course. If you are a provisional broker, you should arrange to take the course you need at least six months ahead of your deadline. Remember that if you fail to take a required course by the end of the first or second year after licensure, your license will be made inactive, and if you don’t take all required courses by the end of the third year, your license will be canceled.

This article came from the January 2010-Vol40-3 edition of the bulletin.

Dates to Remember

Commissionaires Turn 21

In 1989, Executive Director Fisher asked for volunteers among Real Estate Commission staff members to form a choral group to be named the “Commissionaires” to perform primarily during the holiday season at nursing homes and senior centers around Raleigh.

Fisher, who will retire April 1, recalls that in the beginning, when Commission staff was half its present size, choristers totaled hardly more than half a dozen. Today,  the number totals more than 20.

The group’s first director was Education/Examination Officer Anita R. Burt, who taught and directed choral music at Meredith College prior to joining the Commission. These duties are now under the baton of Miriam J. Baer, Legal Services Assistant Director and Legal Counsel.

The Commissionaires have brightened the holiday season for audiences in the past two years at the Veteran’s Administration Hospital in Durham, the historic State Capitol building, and the Mayview Convalescent Center in Raleigh. In 2007, they helped commemorate the Commission’s 50th Anniversary observance and in 2005 the dedication of the Commission office building.

This article came from the January 2010-Vol40-3 edition of the bulletin.

Commission Creates Financial Fraud Unit

With the number of mortgage fraud investigations rapidly escalating, the Commission created a new Financial Fraud Unit to investigate these cases and to work with state and federal law enforcement agencies to bring appropriate cases for criminal prosecution.

Janet B. Thoren, the Commission’s Chief Deputy Legal Counsel and a Special Assistant United States Attorney, will supervise the unit. Michael Gray, the Commission’s former Chief Auditor/Investigator, has been designated as the Chief Financial Fraud Investigator.  As an investigator with the Commission for the past 14 years, Mr. Gray focused almost exclusively on mortgage fraud cases since 2000. In addition, the Commission has employed D. Scott Schiller in the position of Financial Fraud Investigator. Mr. Schiller, a former Special Agent with the Internal Revenue Service Criminal Investigation Division, has an extensive background in criminal investigation and mortgage fraud.

The Financial Fraud Unit is responsible for investigating mortgage fraud cases involving real estate licensees and working with federal and state agencies to promote the criminal prosecution of those involved in mortgage fraud.

This article came from the January 2010-Vol40-3 edition of the bulletin.

Borrower Beware

Many borrowers fudge a little when applying for a loan. The truth is, any lying on a real estate loan application is mortgage fraud.

Speaking about mortgage fraud, U.S. Attorney General Eric Holder said “these crimes have devastated and driven away many who were once willing to invest in our economy. They’ve robbed people of their homes and their economic security. They’ve depleted bank accounts and pension funds. In some places, they’ve dried up philanthropic giving and shuttered charities. They’ve placed unfair challenges before cash-strapped governments, local police departments, small businesses, and American workers and consumers.”

Given the steep rise in foreclosures and bank failures from bad loans, and the resulting economic decline, licensees should know now that even “little white lies” constitute mortgage fraud.

This article came from the January 2010-Vol40-3 edition of the bulletin.

Benjamin Cone, III, Elected Commission Vice Chairman

Benjamin Cone, III, of Charlotte has been elected Vice Chairman of the North Carolina Real Estate Commission, it was announced by Phillip T. Fisher, Executive Director.

A member of the Commission since 2007, Cone is Managing Director of Milestone Partners, LLC, in Charlotte.

He has held management positions in the textile and commercial furniture industries.

Cone is a graduate of the University of North Carolina with a Bachelor of Arts in Economics and North Carolina State University with a Bachelor of Science in Textile Management, Magna Cum Laude.

This article came from the January 2010-Vol40-3 edition of the bulletin.

Bart T. Bryson

The Commission regrets the passing of Bart T. Bryson of Hendersonville, a member of the Commission from 1979 to 1985 and a former Chairman.

This article came from the January 2010-Vol40-3 edition of the bulletin.

Pay Now Or Pay Later

By Emmet R. Wood, Director, Audits and Investigations

A year ago, we introduced an additional way of auditing Trust Accounts – the “Inspections by Letter” Program. Announced in the January 2009 Auditor’s Corner, the program supplemented our ongoing method of “spot” audits, conducted during unannounced, on-site visits.

To review briefly, our letters to brokers-in-charge requested specific types of records:

Once your records were received, a staff auditor examined them and, if any clarification was needed, contacted you. We then mailed a report explaining the compliance (or noncompliance) of your trust account records with the Commission’s rules and Trust Account Guidelines.

After working our way through all the mail it generated, we discovered some interesting things from the “Inspections by Letter” program:

• Merely attending our Basic Trust Account Course does not mean you’re going to get it right!

You have to apply the principles taught in the course. For example, the course teaches BICs that after reconciling the trust account bank statement to the trust account journal, a trial balance of the ledger cards should be prepared. BICs with the most serious violations had not prepared trial balances.

• Merely hiring a bookkeeper is not enough!

This is especially true – and too often the case – when the BIC was not requiring the bookkeeper to prepare a trial balance. If you do not fully understand this process, you may find it helpful to review the Basic Trust Account Course materials and to read the May 2008 Auditor’s Corner on “Examining Your Bookkeeper’s Trust Account Trial Balance”.

• Merely purchasing Commission compliant software and attending a class on how to use it does not guarantee compliance!

Although you buy the software and attend the vendor’s training class, when you return to the office you fail to record the trust account transactions correctly. To make matters worse, no effort is made to contact the computer software support personnel for assistance in using the software. In addition, because you don’t fully understand the software and you distrust the reports it issues, you may waste time maintaining books as you did before acquiring the software – thus developing redundant sets of books.

• Merely do it right the first time!

Generally, if trust account bookkeeping is not done properly and the brokerage firm’s trust account records are audited by the Commission, it will be necessary for the BIC to correct the situation by paying an outside accounting consultant to reconstruct the records. This is usually more expensive than hiring the right bookkeeper from the beginning, plus the BIC could face the embarrassment of disciplinary action. So, you could pay now or pay later.

This article came from the January 2010-Vol40-3 edition of the bulletin.

Agents Should Beware Of Fraudulent Schemes

Agents should be aware of fraudulent schemes, refuse to participate, and report any questionable activity to the proper authorities.

These schemes proliferate in distressed real estate markets. The lack of sales and the high foreclosure rate in 2008 and 2009 gave perpetrators the opportunity to reinvent themselves and create new mortgage fraud methods in response to tighter lending regulations. These included:

Builder-Bailout Schemes – In these, builders offer excessive incentives to buyers, which are not disclosed on the mortgage loan documents.

Short Sale Schemes – These combine with foreclosure rescue schemes by promoters recruiting real estate agents and paying them referral fees for locating and soliciting homeowners in foreclosure. Promoters then convince the homeowner to deed their property to a false land trust controlled by the promoter who then negotiates to purchase the property via a short sale with the lender, getting the property for less than the amount owed by the owner. The real estate agent lists and sells the property for a profit to a buyer previously identified by the promoter. The lender takes the loss, the owner takes a hit on his or her credit, and the promoter walks away with the profit.

This article came from the January 2010-Vol40-3 edition of the bulletin.

Disciplinary Actions – January 2010-V40-3

ALBERT REALTY LLC (Asheville) – By Consent, the Commission revoked the firm license of Albert Realty effective November 5, 2009. The Commission found that Albert Realty, a firm conducting sales and property management, produced some, but not all, of the trust account records requested by the Commission.

BETTER BEACH RENTALS (Oak Island) – By Consent, the Commission suspended the firm license of Better Beach Rentals for a period of one year effective December 1, 2009. The Commission then stayed the suspension for a probationary period of one year on certain conditions. The Commission found that an unlicensed employee embezzled approximately $170,000 from the firm’s trust account and that the firm failed to maintain trust account records in accordance with Commission rules. The Commission also found that the firm advertised a property as having eight bedrooms and showed accommodations for as many as twenty people when the septic permit had a maximum occupancy of eight people. The Commission noted that the trust accounts were balanced and fully funded.

KEENAN GHAALIB ABDUL MALI BEY (Kannapolis) – By Consent, the Commission suspended the broker license of Mr. Bey for a period of one year effective December 1, 2009. Forty five days of the suspension were active with the remainder stayed for a probationary period to the end of the suspension term. The Commission found that Mr. Bey, a provisional broker, timely reported a conviction on May 28, 2008 for Criminal Use of Counterfeit Trademark. The Commission also found that Mr. Bey disclosed on his broker license application a 2006 disciplinary action by the North Carolina Board of Barber Examiners for allowing un unlicensed barber to rent a booth in his shop as well as a 1991 conviction for Driving After Drinking with a Provisional License when he was 16 years old, and that in October 2008, he was disciplined by the NC Board of Barber Examiners for operating his shop with an expired license.

CHRISTOPHER HOPKINS BRADY (Atlanta, Georgia) – By Consent, the Commission suspended the broker license of Mr. Brady for a period of one year effective July 21, 2009. Sixty days of the suspension were active with the remainder stayed for a probationary period extending to the end of the one-year term on certain conditions. The Commission found that Mr. Brady’s Georgia broker license was suspended by the Georgia Real Estate Commission effective January 1, 2007 and he failed to report the Georgia discipline to the North Carolina Commission as required by the Real Estate Law and Commission rules even though he was licensed in North Carolina at that time. The Commission noted that Mr. Brady completed his disciplinary action in Georgia and is now on active status in that state and that he reported the Georgia disciplinary action on his North Carolina license reinstatement application.

CITYWIDE REALTY SERVICES, INC. (Wrightsville Beach) – The Commission accepted the permanent voluntary surrender of the firm license of Citywide Realty Services effective January 1, 2010. The Commission dismissed without prejudice allegations that Citywide Realty Services violated provisions of the Real Estate License Law and Commission rules. Citywide Realty Services neither admitted nor denied misconduct.

PAUL R. GWAZ (Fort Lauderdale, Florida) – The Commission revoked the broker license of Mr. Gwaz effective December 17, 2009. The Commission found that Mr. Gwaz falsely represented the arrangements and details of a real estate investment scheme to investor-clients; failed to maintain investor-client funds in a trust account as required by Commission rules and converted funds received from investor-clients to his own use; failed to provide information and records requested by a representative of the Commission; and incompletely prepared a lease-option agreement on a form not intended for that purpose using ambiguous terms and conditions.

JOHN GLASS HAMILTON (Oak Island) – By Consent, the Commission suspended the broker license of Mr. Hamilton for a period of two years effective December 1, 2009. The Commission then stayed the suspension for a probationary period of two years. The Commission found that Mr. Hamilton, as broker-in-charge of his property management firm for approximately five months, failed to perform monthly trust account reconciliations and failed to maintain complete records to identify ownership of trust account funds. Prior to and during Mr. Hamilton’s tenure as broker-in-charge, an unlicensed employee embezzled approximately $170,000 from the firm’s trust account. The Commission also found that Mr. Hamilton hired his firm to act as property manager for his own rental property and allowed the property to be represented as having eight bedrooms and showing accommodation for as many as 20 people when the septic permit had a maximum occupancy of eight.

MARY ANNE HARMON (Hendersonville) – By Consent, the Commission suspended the broker license of Ms. Harmon for six months effective January 1, 2010. The Commission then stayed the suspension for a six-month probationary period on certain conditions. The Commission found that Ms. Harmon served as listing agent for a property and represented its square footage as 2,645 square feet of heated living area when it was actually approximately 2,400 square feet, an error of approximately 10%. The Commission also found that the error was discovered when the property, purchased by an investor who made subsequent improvements, failed to appraise at resale.

RONALD M. HAVERLAND (Graham) – By Consent, the Commission suspended the broker license of Mr. Haverland for a period of 18 months effective December 1, 2009. The Commission then stayed the suspension and placed Mr. Haverland on probation for the suspension term on certain conditions. The Commission found that Mr. Haverland was the broker-in-charge of a sole proprietorship providing property management and home owners association (HOA) management services, and that his unlicensed bookkeeper wrote two checks on an HOA trust account to pay approximately $20,000 in property taxes for Mr. Haverland’s personally owned properties and admitted taking cash payments for homeowners’ dues and using this cash to pay bills for the firm. The Commission noted that Mr. Haverland and the bookkeeper repaid all of the embezzled funds.

MICKIE HELMS (Wrightsville Beach) – By Consent, the Commission permanently revoked the broker license of Ms. Helms effective January 1, 2010. The Commission found that Ms. Helms, as broker-in-charge of a real estate brokerage firm, sold a property she owned and disclosed to the lender on the HUD closing statement that she was paying a $16,620 marketing fee to another firm when, in fact, she had agreed that the fee was to be paid by that firm to the buyer as a seller concession.

SUSAN D. HENSLEY (Asheville) – By Consent, the Commission revoked the broker license of Ms. Hensley effective November 5, 2009. The Commission found that Ms. Hensley, qualifying broker and broker-in-charge of Albert Realty, produced some, but not all, of the trust account records requested by the Commission.

LISA C. HOOVER (China Grove) – By Consent, the Commission revoked the broker license of Ms. Hoover effective June 15, 2009. The Commission found that Ms. Hoover, acting as broker-in-charge of a firm managing approximately 100 rental properties, failed to keep accurate records of funds of others in their possession and failed to reconcile trust account records to the records provided by the bank. The Commission noted that Ms. Hoover terminated the employment of the firm’s rental manager/bookkeeper and attempted to bring the firm’s books and records into compliance with Commission rules, that she eventually accounted for and remitted the security deposits to their clients or successor manager, and that there are no known outstanding monetary claims. Ms. Hoover neither admitted nor denied the Commission’s findings.

KATHLEEN E. JONES (New Bern) – By Consent, the Commission suspended the broker license of Ms. Jones for a period of one year effective November 1, 2009. The Commission then stayed the suspension for a probationary period of one year on certain conditions. The Commission found that Ms. Jones failed to take steps to deal with tenants who did not pay rent, failed to properly inform the owners about the condition of their properties, and neglected to secure a security deposit from a tenant. The Commission also found that Ms. Jones failed to review trial balances on the property management trust accounts and was unaware of deficit spending and overages in the accounts.

KIMBERLY M. KEESEE (Oak Island) – By Consent, the Commission suspended the broker license of Ms. Keesee for a period of one year effective December 1, 2009. The Commission then stayed the suspension for a probationary period of one year on certain conditions. The Commission found that Ms. Keesee served as broker-in-charge of a licensed firm providing property management services from which an unlicensed employee embezzled approximately $170,000 in trust monies. The Commission further found that Ms. Keesee failed to adequately supervise the activities of the firm, failed to perform monthly reconciliations, and failed to maintain complete records to identify ownership of trust account funds in accordance with Commission rules.

MAREK KUCHARSKI (Durham) – By Consent, the Commission reprimanded Mr. Kucharski effective January 1, 2010. The Commission found that Mr. Kucharski, acting as a buyer’s agent with a Spanish-speaking buyer, allowed a bilingual broker associated with his firm and assisting him in the transaction, to access the MLS lock box code for the property being purchased by the buyer when the broker was not a member of the MLS. The Commission also found that the associated broker, despite the seller’s refusal, allowed painters to enter the property and begin work on it before the deed was recorded. Finally, the Commission found that Mr. Kucharski failed to respond to Letters of Inquiry from the Commission.

SAMUEL LONGIOTTI (Chapel Hill) – By Consent, the Commission reprimanded Mr. Longiotti effective December 31, 2009. The Commission found that Mr. Longiotti, acting as broker and agent for the owners of a shopping center in 2003, did not keep certain client monies in trust accounts designated as such and, while Mr. Longiotti kept a record of clients’ money, his bookkeeping did not conform to the requirements of Commission rules. The Commission also found that an unlicensed associate of Mr. Longiotti’s firm received client monies from the firm’s bank account without authority. The Commission noted that when the unauthorized use of monies was discovered, the monies were restored, the unlicensed employee was separated from Mr. Longiotti’s firm, and Mr. Longiotti changed his accounting methods to comport with Commission rules.

JULIA MARIA MATTESON MCINTOSH (Cary) – By Consent, the Commission revoked the broker license of Ms. McIntosh effective December 1, 2009. The Commission found that Ms. McIntosh, acting as broker-in-charge of her sole proprietorship, permitted an unlicensed person, her husband, to negotiate a contract and a commission to be paid to Ms. McIntosh in a transaction in which she did not represent any of the parties. The Commission also found that Ms. McIntosh failed to obtain a written agency agreement with any party, failed to provide agency disclosure, failed to obtain a property disclosure statement for the buyer, failed to collect an earnest money deposit from the buyer and failed to disclose to the lender in the transaction that a portion of her commission was to be rebated back to the buyer in the form of an hvac unit for the property.

ROBERT MELVIN NELSON (Gastonia) – The Commission accepted the voluntary surrender of the broker license of Mr. Nelson for a period of three years effective November 5, 2009. The Commission dismissed without prejudice allegations that Mr. Nelson violated provisions of the Real Estate Law and Commission rules. Mr. Nelson neither admitted nor denied misconduct.

PLAZA ASSOCIATES  (Raleigh) – By Consent, the Commission suspended the firm license of Plaza Associates for a period of six months effective July 13, 2009. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Plaza Associates, acting as broker and agent for the owners of a shopping center in 2003, did not keep certain client monies in trust accounts designated as such and, while the firm kept a record of clients’ money, its bookkeeping did not conform to the requirements of Commission rules. The Commission also found that an unlicensed associate of the firm received client-monies from the firm’s bank account without authority. The Commission noted that when the unauthorized use of monies was discovered, the monies were restored, the unlicensed employee was separated from the firm, and the firm changed its accounting methods to comport with Commission rules.

REGENCY REAL ESTATE HOLDINGS L.L.C. (Wilson) – By Consent, the Commission revoked the firm license of Regency Real Estate Holdings effective December 20, 2009. The Commission found that an unlicensed member/manager of the firm accessed the trust accounts and used certain money for his own purposes. The Commission also found that Regency Real Estate Holdings failed to assure that its trust accounts and the records pertaining to them were properly maintained and was unable to make its trust account records available for inspection by the Commission’s representatives.

SARRA PROPERTY GROUP, INC. (Charlotte) – By Consent, the Commission revoked the firm license of Sarra Property Group effective June 15, 2009. The Commission found that Sarra Property Group, a firm managing approximately 100 rental properties, failed to keep accurate records of funds of others in its possession and failed to reconcile trust account records to the records provided by the bank. The Commission noted that Sarra Property Group’s broker-in-charge terminated the employment of the firm’s rental manager/bookkeeper and attempted to bring its books and records into compliance with Commission rules, that it eventually accounted for and remitted the security deposits to its clients or successor manager, and that there are no known outstanding monetary claims. Sarra Property Group neither admitted nor denied the Commission’s findings.

ROBERT C. STOKES (Wilson) – The Commission accepted the permanent voluntary surrender of the broker license of Mr. Stokes effective January 14, 2010. The Commission dismissed without prejudice allegations that Mr. Stokes violated provisions of the Real Estate License Law and Commission rules. Mr. Stokes neither admitted nor denied misconduct.

PHYLLIS C. WILCOX (Winston-Salem) – By Consent, the Commission reprimanded Ms. Wilcox effective December 9, 2009. The Commission found that Ms. Wilcox, acting as dual agent for a 7.3-acre tract, failed to deliverWorking With Real Estate Agents brochures to either buyer or seller and had no buyer agency agreement although she did have in her files a signed dual agency addendum. The Commission also found that Ms. Wilcox failed to adequately discuss specific inspections with her buyer-clients, thus complicating their attempt to obtain a septic permit. The Commission noted that the buyers were eventually able to obtain a five-bedroom septic permit.

DIANNE S. WILSON (Wilson) – By Consent, the Commission revoked the broker license of Ms. Wilson effective December 20, 2009. The Commission found that Ms. Wilson, as the qualifying broker and broker-in-charge of a rental property management firm, did not oversee the firm’s trust accounts and an unlicensed member/manager of the firm accessed the trust accounts and used certain money for his own purposes. The Commission also found that Ms. Wilson failed to assure that the trust accounts and the records pertaining to them were properly maintained and was unable to make the trust account records available for inspection by the Commission’s representatives.

THOMAS F. WRIGHT (Raeford) – The Commission accepted the permanent voluntary surrender of the broker license of Mr. Wright effective December 14, 2009. The Commission dismissed without prejudice allegations that Mr. Wright violated provisions of the Real Estate License Law and Commission rules. Mr. Wright neither admitted nor denied misconduct.

ROSS C. ZANG (New Bern) – By Consent, the Commission suspended the broker license of Mr. Zang for a period of one year effective November 1, 2009. Forty-five days of the suspension were active with the remainder stayed for a probationary period through the end of the suspension term. The Commission found that Mr. Zang, who conducted real estate brokerage and property management services, failed to take steps to deal with tenants who did not pay rent, failed to properly inform the owners about the condition of their properties, and neglected to secure a security deposit from a tenant. The Commission also found that Mr. Zang allowed properties to be damaged including allowing a buildup of trash and debris such that one owner was required to pay a fine for violation of the town’s nuisance ordinance.

This article came from the January 2010-Vol40-3 edition of the bulletin.