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Appearances

Steve Fussell, Chief Consumer Protection Officer, spoke at Weaver Street Realty’s Sales Meeting on April 7.

Sheryl Graham, Consumer Protection Officer, spoke at Realty Executives of Hickory’s Agent Training on April 8.

Sheryl Graham, Consumer Protection Officer, spoke at Salisbury Rowan Association of REALTORS’s Are You Prepared Panel on April 22.

Updated Investment Policy – Investment in MDIs

As part of its commitment to racial equity, the Commission has updated its internal Investment Policy to provide that a significant portion of its own funds are deposited in minority-owned depository institutions (MDIs).

MDIs are defined by the FDIC as institutions where (1) 51% or more of the voting stock is owned by minority individuals, or (2) a majority of the board of directors is minority and the community that the institution serves is predominantly minority. Ownership must be by U.S. citizens or permanent legal U.S. residents to be counted in determining minority ownership. The term “minority” is defined as any “Black American, Asian American, Hispanic American or Native American.”

Under the new policy, Commission funds are deposited in U.S. financial institutions where they are either FDIC insured, regulated by the Office of the Controller of Currency or the Federal Reserve, or collateralized in accordance with guidance issued by the NC Department of State Treasurer. This ensures that the funds are protected at all times. The policy sets out target goals for the Commission’s funds, including certain North Carolina institutions and MDIs. The target range for MDIs is 20 – 40 %. In other words, the Commission seeks to keep between 20 and 40% of its funds in minority-owned institutions at all times, with a preference for institutions in North Carolina or the Southeast region.

Current Stats: Total Disciplinary Cases as of February 28, 2021

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The Pitfalls of Using Escalation Clauses

By 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, but does not prohibit them.  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.” Therefore, in the unlikely event that a buyer consents to allow a broker to share the price and terms specified in their offer with another prospective buyer, then and only then may the broker do so.

Pitfalls of escalation clauses:

              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 he or she is 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. The use of such clauses may introduce confusion, anxiety, frustration and fraud.  For these reasons, the Commission discourages their usage and the disclosure of the terms of competing offers even when authorized by buyers.

Appearances

Peter Myers, Information Officer, spoke at NC Best Practices Meeting on March 10.

Danielle Alston, Consumer Protection Officer, spoke at FM Realty Sales Meeting on March 16.

Fred Moreno, Chief Deputy Legal Counsel, spoke at the Materiality of Nearby Concentrated Animal Feeding Operations discussion on March 19.

Dee Bigelow, Consumer Protection Officer, spoke at the URE-QC Presents – Straight Talk with the NCREC on March 30.

Disciplinary Actions

KRISTINE YATES BOURGEOIS (RALEIGH) – By Consent, the Commission reprimanded Ms. Bourgeois effective March 10, 2021. The Commission found that Respondent acted as the buyer’s agent in the purchase of residential real property. After going under contract, the listing agent sent Ms. Bourgeois a text stating “new main water line will be installed due to slow leak somewhere in the main line.” Ms. Bourgeois failed to confirm that the water line was replaced prior to closing. The subject property closed without the water line being replaced. 

JOHN CARL CARMENATE (BURLINGTON) – By Consent, the Commission reprimanded Mr. Carmenate effective March 10, 2021. The Commission found that Mr. Carmenate, acting as the qualifying broker and broker-in-charge of a firm, failed to renew the Firm’s license with the Commission and failed to keep its Certificate of Authority active with the Secretary of State. Following expiration of the Firm’s license, Mr. Carmenate continued to manage properties in North Carolina and failed to respond to Letters of Inquiry and other communications from Commission staff.

STEPHANNIE ANNETH CHESLEY (MOORESVILLE) – By Consent, the Commission reprimanded Ms. Chesley effective March 10, 2021. The Commission found that Ms. Chesley acted as a co-listing agent for residential real property. The first buyer (“Buyer 1”) terminated the contract after having a home inspection performed. This inspection report was given to Ms. Chesley and noted certain material issues throughout the home. She took the home off the market while the sellers had their insurance company fix the leak in the kitchen and make extensive repairs to that area of the home as well as the crawlspace then placed the property back on the market and it went under contract with another buyer (“Buyer 2”). Buyer 2’s home inspection revealed some of the same material issues noted in Buyer 1’s inspection report. Buyer 2 terminated the contract and gave a copy of their inspection report to Ms. Chesley. The sellers addressed some, but not all, of the material issues noted in Buyer 2’s inspection report. Ms. Chesley placed the property back on the market and a few days later, it was under contract with another buyer (“Buyer 3”). Buyer 3 terminated before the end of the due diligence period and did not provide a copy of their inspection report to Ms. Chesley. She then placed the property back on the market and a few weeks later, it was under contract with another buyer (“Buyer 4”) who ultimately purchased it. Ms. Chesley failed to disclose the material issues noted on previous home inspection reports or other inspections performed, not corrected by the sellers, to Buyer 2, Buyer 3, and Buyer 4 or their agents at the time the offers were made. Ms. Chesley failed to advise her seller-clients to update their original answers on the property disclosure form.

MENATALLA EFFAT (CHARLOTTE) – The Commission accepted the voluntary surrender of the broker license of Ms. Effat effective February 17, 2021. The Commission dismissed without prejudice allegations that Ms. Effat violated provisions of the Real Estate License Law and Commission rules. Ms. Effat neither admitted nor denied misconduct.

JENNIFER PEARL GALLAGHER (RALEIGH) – By Consent, the Commission suspended the broker license of Ms. Gallagher for a period of twelve (12) months effective January 31, 2021. The Commission required the first sixty (60) days to be active and stayed the remainder of the suspension effective April 1, 2021, and placed Ms. Gallagher on probation until January 30, 2022. The Commission found that Ms. Gallagher was showing a residential property to her buyer-client and entered the subject property prior to her buyer-client arriving. A camera inside the subject property captured Ms. Gallagher consuming alcohol from some of the property owner’s bottles. Ms. Gallagher later sent a letter of apology to the property owner and has replaced the bottles. The Commission notes that Ms. Gallagher is remorseful for her actions.

STANLEY B MARTIN (HIGH POINT) – By Consent, the Commission reprimanded Mr. Martin effective March 9, 2021. The Commission found that in May 2018, Mr. Martin acting as the qualifying broker and the broker-in-charge for a firm, misrepresented the square footage for a property he listed. Mr. Martin listed the property as having 2,150 square feet. In fact, the property was only 1,590 square feet, a difference of approximately 36%.

LANE FRANKLIN MCKINNEY (MOORESVILLE) – By Consent, the Commission reprimanded Mr. McKinney effective March 10, 2021. The Commission found that Mr. McKinney acted as a co-listing agent for residential real property. The first buyer (“Buyer 1”) terminated the contract after having a home inspection performed. This inspection report was given to the co-listing agent and noted certain material issues throughout the home. The home was taken off the market while the sellers had their insurance company fix the leak in the kitchen and make extensive repairs to that area of the home as well as the crawlspace then the property was placed back on the market and it went under contract with another buyer (“Buyer 2”). Buyer 2’s home inspection revealed some of the same material issues noted in Buyer 1’s inspection report. Buyer 2 terminated the contract and gave a copy of their inspection report to the co-listing agent. The sellers addressed some, but not all, of the material issues noted in Buyer 2’s inspection report.  The property was placed back on the market and a few days later, it was under contract with another buyer (“Buyer 3”). Buyer 3 terminated before the end of the due diligence period and did not provide a copy of their inspection report to Mr. McKinney. The property was then placed back on the market and a few weeks later, it was under contract with another buyer (“Buyer 4”) who ultimately purchased it. Mr. McKinney failed to disclose the material issues noted on previous home inspection reports or other inspections performed, not corrected by the sellers, to Buyer 2, Buyer 3, and Buyer 4 or their agents at the time the offers were made. Mr. McKinney failed to advise his seller-clients to update their original answers on the property disclosure form.

TIFFANY ADAMS MYERS (FAYETTEVILLE) – The Commission accepted the permanent voluntary surrender of the broker license of Ms. Adams Myers effective February 17, 2021. The Commission dismissed without prejudice allegations that Ms. Adams Myers violated provisions of the Real Estate License Law and Commission rules. Ms. Adams Myers neither admitted nor denied misconduct.

NRT CAROLINAS LLC (CHARLOTTE) – By Consent, the Commission reprimanded NRT Carolinas LLC effective February 17, 2021. The Commission found that the acting broker-in-charge (“BIC”) failed to supervise two provisional brokers (“PB’s”) who acted as co-listing agents where they failed to ensure that their seller-clients had either repaired all material items identified on home inspection reports or updated their answers on the property disclosure form. The PB’s also failed to disclose any remaining material items to buyers at the time offers were made. The Commission notes that Respondent has updated their policy manual to include increased supervision and training of PB’s.

PIEDMONT REALTORS LLC (HIGH POINT) – By Consent, the Commission reprimanded Piedmont Realtors LLC effective March 9, 2021. The Commission found that in and May 2018, the firm misrepresented the square footage for a property it listed. Piedmont Realtors LLC listed the property as having 2,150 square feet. In fact, the property was only 1,590 square feet, a difference of approximately 36%.

RIVER WALK PROPERTIES (HAW RIVER) – The Commission accepted the permanent voluntary surrender of the broker license of River Walk Properties effective February 17, 2021. The Commission dismissed without prejudice allegations that River Walk Properties violated provisions of the Real Estate License Law and Commission rules. River Walk Properties neither admitted nor denied misconduct.

VICKI SMITH STOWE (WILMINGTON) – By Consent, the Commission reprimanded Ms. Stowe effective March 10, 2021. The Commission found that Ms. Stowe acted as the listing agent in a residential transaction where the seller had a home inspection performed prior to listing the property for sale, a copy of which was given to her. This inspection revealed material issues with the property. No repairs were made to the property and the RPOAD was completed by the seller with no issues noted. A few months later, Buyer #1 went under contract to purchase the subject property and had a home inspection performed. Ms. Stowe failed to disclose all material issues to Buyer #1. Similar material issues were noted on Buyer #1’s inspection report as were noted on the pre-listing inspection report and a copy of Buyer #1’s report was given to Ms. Stowe. Buyer #1 later terminated the contract. The seller addressed some, but not all, material issues noted in the previous inspection reports such as issues with the HVAC system and electrical. The next month, Buyer #2 went under contract to purchase the subject property and had a home inspection performed. Ms. Stowe failed to disclose all material issues to Buyer #2. Similar material issues were noted on Buyer #2’s inspection report as were noted on Buyer #1’s inspection report and the pre-listing inspection report. Buyer #2 terminated the contract and a copy of his inspection report was given to Ms. Stowe.  

THE KEY GROUP ENTERPRISES INC. (FAYETTEVILLE) – The Commission accepted the permanent voluntary surrender of the broker license of The Key Group Enterprises Inc. effective February 17, 2021. The Commission dismissed without prejudice allegations that The Key Group Enterprises Inc. violated provisions of the Real Estate License Law and Commission rules. The Key Group Enterprises Inc. neither admitted nor denied misconduct.

HUD Announcement on Fair Housing Act Enforcement

On February 11, 2021, The Department of Housing and Urban Development (HUD) announced that it will begin enforcement of the Fair Housing Act to prohibit housing discrimination based on sexual orientation and gender identity in addition to enforcement of discrimination based on previously identified protected classes including familial status, race, ethnicity, sex, handicap, color, religion, and national origin.

The memo notes that State and local jurisdictions which enforce the Federal Fair Housing Act also will be required to administer those laws to prohibit discrimination because of sexual orientation and gender identity.  Additionally, regional offices and jurisdictions have been advised to review allegations of discrimination because of gender identity or sexual orientation that had been received since January 20, 2020, and notify persons who alleged such discrimination that their claims may be timely for filing.

In addition, the recent sunset of “House Bill 2” effectively means that local governments may now choose to adopt non-discrimination ordinances. Licensees should be aware of any local ordinances in their market areas that address housing discrimination.

The HUD memo is available at:  https://www.hud.gov/press/press_releases_media_advisories/hud_no_21_021

Homeowner Protection Extensions

On February 16, 2021, the White House announced the following extensions of COVID-19 protections for homeowners:

Homeowners and renters can visit consumerfinance.gov/housing for more information on relief options.

The announcement is available at: 

https://www.whitehouse.gov/briefing-room/statements-releases/2021/02/16/fact-sheet-biden-administration-announces-extension-of-covid-19-forbearance-and-foreclosure-protections-for-homeowners/

Appearances

Sheryl Graham, Consumer Protection Officer, spoke at HomeTown Realty’s Brokers Office Meeting on February 25.

Disciplinary Actions

MICHAEL ANTHONY BOWMAN (CHARLOTTE) – The Commission accepted the voluntary surrender of the broker license of Mr. Bowman effective February 1, 2021. The Commission dismissed without prejudice allegations that Mr. Bowman violated provisions of the Real Estate License Law and Commission rules. Mr. Bowman neither admitted nor denied misconduct.

BOWMAN REAL ESTATE LLC (CHARLOTTE) – The Commission accepted the voluntary surrender of the broker license of Bowman Real Estate LLC effective February 1, 2021. The Commission dismissed without prejudice allegations that Bowman Real Estate LLC violated provisions of the Real Estate License Law and Commission rules. Bowman Real Estate LLC neither admitted nor denied misconduct.

EMSLEY A. LANEY, III (WILMINGTON) – Following a hearing, the Commission permanently revoked the broker license of Mr. Laney effective December 31, 2020. The Commission found that Mr. Laney failed to maintain and retain trust account records. Mr. Laney also failed to safeguard and account for trust monies resulting in trust account shortages.

LANEY REAL ESTATE CO. (WILMINGTON) – Following a hearing, the Commission permanently revoked the firm license of Laney Real Estate CO. effective December 31, 2020. The Commission found that Laney Real Estate CO failed to maintain and retain trust account records. Laney Real Estate CO also failed to safeguard and account for trust monies resulting in trust account shortages.

DAVID MOSELEY PROCTOR (KINSTON) – By Consent, the Commission permanently revoked the broker license of Mr. Proctor effective January 15, 2021. The Commission found that Mr. Proctor failed to enter into an agency agreement with a buyer-client prior to submitting an offer to the seller. Mr. Proctor also failed to enter into an agency agreement before representing a seller-client. Mr. Proctor misrepresented to his seller-clients that his buyer-client did not want to purchase a second lot from the sellers. Mr. Proctor’s misrepresentation induced his seller-clients to sell the lot to him for $1.

CARMEN WHITLEY SHAW (NORTH MYRTLE BEACH) – By Consent, the Commission reprimanded Ms. Shaw effective January 1, 2021. The Commission found that Ms. Shaw, whose license has been on inactive status since July 1, 2016, was employed as an administrative assistant at a firm. In July, 2020, Ms. Shaw’s broker-in-charge made an appointment to show a property in Carolina Shores, NC, which included in the MLS that “Sellers require everyone entering home to wear mask and gloves” due to COVID-19. Instead of the broker-in-charge, Ms. Shaw showed the property to potential buyers, who were members of her family, and, while at the subject property, did not follow the directive of the seller that that masks and gloves needed to be worn at all times.

TEAM ANDERSON REALTY (HOLLY SPRINGS) – By Consent, the Commission reprimanded Team Anderson Realty effective February 1, 2021. The Commission found that the firm falsely advertised the square footage of a home in the MLS when the affiliated listing agent included a basement area with no heat source in the living area, contrary to the professional measurer’s description.