Charlie Moody, Legal Counsel, spoke at the Greensboro Regional Realtors Association’s First Tuesday Membership Meeting on November, 3.
Pete Myers, Information Officer, spoke at eXp Realty LLC’s NC Broker Meeting on November 19
By Sheryl B. Graham, Consumer Protection Officer
An unsuccessful buyer who submitted an offer to purchase a beach-front property through his buyer agent filed a complaint with the Commission against the listing agent.
Before showing the property, the buyer agent texted the listing agent asking questions about the property. She asked if there was any storm damage from a prior hurricane, the location of the set-back lines, and if a structure could be rebuilt on the lot if the current structure was extensively damaged. The listing agent answered some of the questions via text and stated she was waiting for answers to the remaining questions. There was no response from the listing agent regarding whether or not the lot would be buildable if the structure were to be heavily damaged. The listing agent and the buyer agent also spoke by telephone. The buyer agent recalled the listing agent stating the damage from a prior storm was mostly cosmetic and was being repaired. The listing agent recalled telling the buyer agent to contact the local Division of Coastal Management, which carries out the state’s Coastal Area Management Act (aka CAMA) requirements, regarding the property setback lines.
The buyer submitted an offer to purchase without receiving additional answers or verifying information. After the inspections and survey were completed, the buyer contacted a CAMA representative regarding the setback lines. The buyer learned the lot was “non-conforming”, meaning the structure could not be rebuilt in the existing footprint if it was damaged beyond 50%. According to the CAMA office, a lot classification can change with the location of the first stable vegetation line in relationship with the ocean. Changes can occur due to storms, hurricanes, and acts of nature. Therefore setback lines and lot classifications of beach-front properties should be verified with current information. The standard setback from the oceanfront is a minimum of 60’ from the first stable line of vegetation. If the house or structure is within 60’, the house is “non-conforming,” meaning that repairs and maintenance can be made to the property of up to 50% of the structure (whether caused by storm, hurricane, flood, etc.). If the repairs / maintenance are for more than 50% of the structure, that is deemed “development” and must be approved through new construction guidelines and meet the current requirements. A standard survey does not indicate the location of setback lines and should not be relied upon to determine if a lot is non-conforming or not.
The buyer was not interested in continuing with the purchase and although it was past the due diligence (DD) date, the seller released the earnest money deposit, but not the DD fee. The seller updated the Residential Property Owners Association Disclosure and the listing agent revised the MLS to reflect the information about the non-conforming lot. The buyer filed a complaint against the listing agent for failure to disclose a material fact.
The North Carolina Real Estate Commission (NCREC) publication Purchasing Coastal Real Estate in North Carolina advises consumers: “…If you are working with a licensed real estate broker, the broker has the duty to disclose material facts that the broker knows or reasonably should know. Although real estate brokers may not always know erosion rates or setback location for particular oceanfront properties, they should advise you of the possibility of erosion and direct you to available sources of information…”. It further states: “…Purchasers should determine if the lot and building presently meet the setback for new construction and [if the lot is] eligible for a replacement building, keeping in mind the risk that erosion may make the lot unbuildable in the future.”
During investigation of the case, both the buyer agent (a provisional broker) and her broker-in-charge were added as Respondents. The Commission cautioned the listing agent to discover and disclose material facts and features about properties prior to listing. The Commission cautioned the buyer agent to discover and disclose material facts about a property prior to assisting a buyer with submitting an offer. The Commission cautioned the buyer agent’s broker-in-charge regarding supervision of provisional brokers and training to discover and disclose material facts. In this case, confirming answers to the buyer’s questions prior to submitting an offer would have saved the parties time, money and headaches. Properties in particular markets, such as oceanfront areas, have features and nuances unique to their location. Brokers representing clients in these areas should know, disclose and communicate those characteristics.
For further information, visit:
BRANDI UTOPIA BAKER (Greensboro) – By Consent, the Commission suspended the broker license of Ms. Baker for a period of 6 months effective November 1, 2020. The Commission then stayed the suspension in its entirety. The Commission found that Ms. Baker visited the condominium her buyer-client was purchasing after being notified the condominium may have been damaged by a sewage back up. Ms. Brown did not communicate the potential damage to her buyer-client before he signed the closing documents and mailed them to the closing attorney.
Miriam Baer, Executive Director, spoke at the HM Properties event on October 29.
Sheryl Graham, Consumer Protection Officer, spoke at the Century 21 Liberty sales meeting on October 29.
Jean Hobbs, Auditor/Investigator, spoke at the NARPM Charlotte Chapter meeting on September 16.
SUSAN CLIFT BROWN (Southern Pines) – By Consent, the Commission suspended the broker license of Ms. Brown for a period of 3 years effective May 1, 2020. The Commission then stayed the suspension in its entirety. Ms. Brown, acting as the qualifying broker and broker-in-charge, failed to review the firm’s trust account records which allowed her bookkeeper, to embezzle at least $37,000 from the firm’s trust account over approximately 7 years. Ms. Brown failed to safeguard her trust account and maintain records in full compliance of Commission rules.
DONNA GLOSSON REZEN (Pittsboro) – By Consent, the Commission suspended the broker license of Ms. Rezen for a period of 12 months effective October 1, 2020. The Commission then stayed the suspension in its entirety. Ms. Rezen, as listing agent for a property, received a buyer’s home inspection report which noted several material facts including: structural problems in a deck extension, non-functioning emergency heat strips in the heating systems, long term leaks in the master bathroom, fungal growth, excessive condensation, and a sagging air duct in the crawlspace, and a dirty water filter for well water. After the first buyer terminated the contract, the subject property went under contract three additional times. Ms. Rezen never advised her seller-client to update the RPOADS to accurately reflect the known material facts and did not otherwise disclose the issues until after Buyer #4 was under contract.
STEPHANIE P WILLIAMS (Shelby) – By Consent, the Commission suspended the broker license of Ms. Williams for a period of 6 months effective September 15, 2020. The Commission then stayed the suspension in its entirety. Ms. Williams acted as the listing agent in a residential transaction and failed to disclose major termite damage to the purchaser of the property at or before the time the offer was made. This material issue was discovered by a previous potential buyer during their inspection and their agent informed Ms. Williams.
S&L REALTY OF CLEVELAND COUNTY LLC (Shelby) – By Consent, the Commission suspended the broker license of S&L Realty of Cleveland County LLC for a period of 6 months effective September 15, 2020. The Commission then stayed the suspension in its entirety. The Firm’s broker-in-charge acted as the listing agent in a residential transaction and failed to disclose major termite damage to the purchaser of the property at or before the time the offer was made. This material issue was discovered by a previous potential buyer during their inspection and relayed to the broker-in-charge by their agent.
RENEE SESSOMS STRICKLAND (Erwin) – By Consent, the Commission reprimanded Ms. Strickland effective September 15, 2020. The Commission found that in or around October 2019 Ms. Strickland listed a property without measuring the property’s square footage. After closing, the buyer discovered the property was approximately 13% smaller than advertised in the MLS.
By Stephen L. Fussell, Chief Consumer Protection Officer
This article is a compilation of multiple cases where licensees failed to disclose material defects in the property to multiple buyers. In some cases, the licensees were sellers who purchased properties to renovate and resell for a profit. In most cases, the licensees were listing agents who represented unlicensed investors/“flippers” or typical sellers.
In the cases involving sellers who were investors, most of the sellers had not inspected the properties when they purchased them. The renovations they performed usually involved cosmetic items: cabinets, countertops, appliances, flooring, plumbing fixtures (e.g. toilets, sinks, faucets, etc.), interior paint, and landscaping. In some cases, the sellers hired unlicensed persons to install HVAC systems or water heaters and did not obtain building permits for improvements that required permits, such as decks, room additions, or structural/mechanical changes. One renovation involved cutting wooden floor joists in the crawl space to make room for new ductwork and pipes without an inspection by a structural engineer or licensed general contractor to evaluate the structural integrity of the remaining floor structure.
Nearly all of the transactions progressed in a similar manner. Following the completion of the renovations, each seller completed a Residential Property and Owners’ Association Disclosure Statement (“RPOADS”) answering “No Representation” to all of the questions. The listing agent then entered the property into the local MLS system generally touting beautiful updates to the property.
Buyer #1 contracted to buy the property and ordered a home inspection which revealed material defects, such as a deck that was structurally unsound, an HVAC system that was underperforming or not working at all, or a basement that was leaking. The agent for Buyer #1 sent a copy of the home inspection report and a Due Diligence Request and Agreement (“DDRA”) to the listing agent. However, due to concern over the condition of the property and the likelihood of expensive future repairs, Buyer #1 terminated the contract during the due diligence period and got the earnest money back, but lost the due diligence fee.
After termination of the contract, the seller did not hire licensed professionals to correct the defects referenced in Buyer #1’s home inspection report and did not revise the RPOADS to disclose any defects. The listing agent put the property back on the market without disclosing any defects in the MLS system or elsewhere.
Unaware of the previous inspection, Buyer #2 contracted to buy the subject property and ordered a home inspection which revealed the same defects as Buyer #1’s inspection. The agent for Buyer #2 sent a copy of the inspection report and a DDRA to the listing agent. The seller promised to make repairs, but when Buyer #2 asked his inspector to re-inspect the property, only a few repairs had been attempted and the quality of those repairs was very poor. Disappointed, Buyer #2 terminated his contract after the expiration of the due diligence period and the seller refused to refund the due diligence fee or the earnest money.
The listing agent put the property back on the market for the third time, again without disclosing any material defects in the MLS or otherwise. The seller did not revise the RPOADS. Buyer #3 quickly and eagerly contracted to buy the property and again paid a due diligence fee and earnest money deposit. Buyer #3 ordered an inspection which identified the same defects reported by the first two home inspectors along with evidence that someone had attempted to conceal some of the defects. Without asking for repairs, Buyer #3 terminated her contract and asked for reimbursement of both the due diligence fee and earnest money deposit as well as the inspection fees, believing that the seller and/or the listing agent had acted dishonestly. The seller refunded only the earnest money.
The listing agent put the property on the market for the fourth time. Buyer #4 was a cash buyer, who had been outbid on several previous properties and was determined not to lose out on this property. Buyer #4 offered to pay full-price and close within seven days with no inspections. The seller accepted the offer and the transaction closed without incident. After the closing, Buyer #4 discovered that the house needed thousands of dollars in repairs (i.e. the same repairs referenced in the first three transactions).
Sometimes, the buyers who terminated filed complaints with the Real Estate Commission. Sometimes, the successful eventual buyers filed complaints, and several filed civil suits against the sellers, the listing agents and the listing firms for willfully withholding material facts.
Lessons to learn:
A listing agent must make a reasonable effort to discover material facts by walking through and around a listed property and by asking the seller questions about the property and obtaining copies of available documentation regarding repairs and renovations. In these cases, the listing agent was put on notice about material defects but failed to confirm that repairs had been made. Unless a listing agent is able to confirm with written documentation that a repair has been made, then the listing agent must disclose the defect to all prospective buyers and/or their agents.
Buyer agents also have a duty to verify issues that their clients have identified as being material to them. A prudent buyer agent should ask a listing agent whether the property has been inspected and, if so, ask for a copy of the inspection report. If the listing agent received a copy of the inspection report from a previous buyer, then the listing agent may give the report to a new buyer agent. If the listing agent did not receive a copy of the previous inspection report, but the agent for the previous buyer informed the listing agent that the report revealed material defects, then the listing agent must disclose to all prospective buyers or their agents that a previous buyer’s home inspection revealed certain material defects and identify those defects.
When a seller has owned a property for a short period of time (i.e. less than one year), a prudent buyer agent should ask whether the seller is an investor or flipper and, if so, ask for copies of all invoices for renovations performed and ask whether all contractors and vendors were licensed and whether they have been paid in full.
Some licensees have tried to hide behind the adage that North Carolina is a buyer beware state. However, a licensee (whether a licensed seller or listing agent) must disclose all material facts that the licensee knows or reasonably should know to all interested persons in a timely manner (i.e. before a buyer enters into a contract to buy the property).
VIVIAN M WOODARD (Boone) – By Consent, the Commission reprimanded Ms. Woodard effective June 3, 2020. The Commission found that Ms. Woodard was the listing agent for a residential property and acted as a dual agent for a buyer that went under contract. The buyer terminated after receiving her home inspection report, which Ms. Woodard reviewed. The report recommended that the buyer consider having a general contractor further evaluate the roof, chimney, attic, deck, and crawl space of the subject property. Ms. Woodard then had a licensed general contractor visit the property to view the crawl space and deck. He determined that the moisture problem in the crawl space had “been resolved” and opined that new joists were in place to support the floor system. The contractor did not view the other areas of the home as recommended by the inspection report, however, Ms. Woodard recommended to her seller-clients that they consider looking further into those issues. Another Buyer went under contract a few days later, who terminated the contract after his home inspection discovered some of the same potential issues noted in the first buyer’s inspection. The first buyer then went back under contract, purchased the subject property, and has had no issues to date. Ms. Woodard reviewed the Working With Real Estate Agents brochure with the first buyer, who understood and agreed that Ms. Woodard was acting as a dual agent. However she failed to execute a separate Buyer Agency Agreement. The first buyer and Ms. Woodard’s seller clients have no complaints regarding representation in the transaction.
ADVANCED REALTY LLC (Boone) – By Consent, the Commission reprimanded Advanced Realty LLC effective June 3, 2020. The Commission found that the Firm listed a residential property for sale and acted as a dual agent for a buyer who went under contract. The buyer terminated after receiving her home inspection report, which the Broker reviewed. The report recommended that the buyer consider having a general contractor further evaluate the roof, chimney, attic, deck, and crawl space of the subject property. The broker then had a licensed general contractor visit the property to view the crawl space and deck. He determined that the moisture problem in the crawl space had “been resolved” and opined that new joists were in place to support the floor system. The contractor did not view other areas of the home as recommended by the inspection report, however, the broker recommended to the seller-clients that they consider looking further into those issues. Another buyer went under contract a few days later, then terminated the contract after his home inspection discovered some of the same potential issues noted in the first buyers inspection. The first buyer then went back under contract, purchased the subject property, and has had no issues to date. The broker reviewed the Working With Real Estate Agents brochure with the first buyer, who understood and agreed that the Firm was acting as a dual agent, however failed to execute a separate Buyer Agency Agreement. The first buyer and the Firm’s seller clients have no complaints regarding representation in the transaction.
MARK EVERETT GUARD (Greensboro) – The Commission accepted the permanent voluntary surrender of the broker license of Mr. Guard effective August 12, 2020. The Commission dismissed without prejudice allegations that Mr. Guard violated provisions of the Real Estate License Law and Commission rules. Mr. Guard neither admitted nor denied misconduct.
HUGH D OSBORNE (Greensboro) – The Commission accepted the permanent voluntary surrender of the broker license of Mr. Osborne effective August 12, 2020. The Commission dismissed without prejudice allegations that Mr. Osborne violated provisions of the Real Estate License Law and Commission rules. Mr. Osborne neither admitted nor denied misconduct.
LAMBETH OSBORNE REALTY (Greensboro) – The Commission accepted the permanent voluntary surrender of the firm license of Lambeth Osborne Realty effective August 12, 2020. The Commission dismissed without prejudice allegations that Lambeth Osborne Realty violated provisions of the Real Estate License Law and Commission rules. Lambeth Osborne Realty neither admitted nor denied misconduct.
JAMES M LEWIS (Glenville) – By Consent, the Commission reprimanded James M Lewis effective October 1, 2020. The Commission found that in or about June 2018, Mr. Lewis, acting as a dual agent in a transaction, ordered a home inspection on behalf of his buyer-client. The home inspection noted a possible infestation of Powder Post Beetles. Mr. Lewis reviewed the home inspection report with the buyer but failed to mention the remarks about the powder post beetles. He submitted a request for a wood-destroying insect inspection to a local pest control firm. but failed to obtain and review a copy of the pest inspection report, which indicated an active infestation of powder post beetles and carpenter beetles, with his buyer-client, although the closing attorney included the report in the package of closing documents. The buyer closed on the house in July 2018, and contracted with a pest control company to spray on a quarterly basis. About 8 months after closing, the pest control company informed the buyer about the infestation and estimated the cost to eliminate the infestations at around $15,000. The Commission noted that Mr. Lewis subsequently paid his buyer-client $15,000 for remediation of the property.
JIM LEWIS REALTY LLC (Glenville) – By Consent, the Commission reprimanded Jim Lewis Realty LLC effective October 1, 2020. The Commission found that in or about June 2018, the Firm, acting as a dual agent in a transaction, ordered a home inspection on behalf of its buyer-client. The inspection noted a possible infestation of Powder Post Beetles. The Firm, through its broker-in-charge, also submitted a request for a wood-destroying insect inspection to a local pest control firm. The broker failed to obtain and review a copy of the pest inspection report, which indicated an active infestation of powder post beetles and carpenter beetles, with his buyer-client, although the closing attorney included the report in the package of closing documents. The buyer closed on the house in July 2018, and contracted with a pest control company to spray on a quarterly basis. About 8 months after closing, the pest control company informed the buyer about the infestation and estimated the cost to eliminate the infestations at around $15,000. The Commission noted that the broker subsequently paid the Firm’s buyer-client $15,000 for remediation of the property.
JAHQUIIS ALSTON (Charlotte) – By Consent, the Commission suspended the broker license of Mr. Alston for a period of 18 months effective July 4, 2020. The Commission then stayed the suspension in its entirety. The Commission found that in December 2016, Mr. Alston submitted an application for his real estate license but failed to disclose a June 2015 disciplinary action from the NC Board of Massage and Bodywork Therapy on his application. In June, 2017, the Massage Board revoked his license based on a second complaint. Mr. Alston also failed to disclose this revocation to the Commission. The Commission noted that in 2019, Mr. Alston submitted an application to the NC Appraisal Board disclosing his two prior disciplinary actions from the NC Board of Massage and Bodywork Therapy.
Nick Smith and Sheryl Graham, Consumer Protection Officers, spoke at the Central Carolina Association of Realtors virtual membership meeting on August 11.
The North Carolina Complete Count Commission (NC CCC) is committed to making the 2020 Census a success for our state. Visit census.nc.gov for information and resources.
Why the Census Matters
The US Census is a once a decade count of everyone residing in the United States. It will have a big impact on North Carolina’s communities through representation, funding, and reliable information. The US Constitution requires a Census every 10 years to determine seats in the US House of Representatives. North Carolina has 13 Congressional seats, but recent estimates show that our state may gain a seat after the 2020 Census. A complete count will ensure that North Carolina’s voice will be appropriately represented in Congress. The Census also provides the most detailed picture of our communities, and governmental funding programs rely on Census data to distribute billions of dollars each year. In Fiscal Year 2015, the US Government distributed over $16 billion in North Carolina providing resources for schools, health care, highways, and more. That’s $1,623 per person per year, and the State of North Carolina also distributes about $200 per person per year to counties and towns based on Census information. Information from the Census helps local service providers and businesses plan for our dynamic state. The Census is important to our future. When you complete your 2020 Census form, you Make NC Count.
How do People Respond
The 2020 Census will shape representation, funding, and planning for North Carolina’s future; and being counted in the Census is quick, easy, and safe. This is the first US Census to allow internet or smartphone responses; you can complete your Census form online. The Census invitation was mailed in March and included a web address, Census ID code, and phone number. If you did not receive it you can still take it at https://2020census.gov/en.html. If you do not have internet access or would rather not reply online, you can provide your information by phone at 844-330-2020. You can also use the phone number to request a paper Census form. Census forms are available in 12 languages, and Census support is available in over 50 languages including American Sign Language. Questionnaire support is available online via chat and over the phone. Census Enumerators are now visiting the addresses of non-responders to make sure everyone is counted. The information you provide is confidential and by law cannot be shared for 72 years. This includes all federal and state government agencies, law enforcement, courts, etc. The Census questionnaire is short and can be completed in a few minutes. Your confidential participation helps provide representation, funding, and planning data to serve your community for the next decade. When you complete your 2020 Census form, you Make NC Count.
How the Census Works
The 2020 Census is a big operation – in fact, it is the largest peacetime operation conducted by the US government. It takes a big operation to count everyone in a nation that is growing and becoming more mobile and diverse. The task of the Census is to count everyone once, only once, and in the right place. This task is required by the Constitution to determine where Congressional seats should be apportioned. Everyone counts in the Census – no matter your age, race, sex, or place of birth. The Census counts everyone in every living situation whether you reside in a house, apartment, dorm, prison, barracks, or are homeless. The Census counts everyone where they usually live on April 1, 2020; but the Census does not change your legal residence for taxes, voter registration, or other residency status.
Participation is required by law. While you can skip questions on the Census form, this increases your likelihood of being visited by a Census Enumerator.
Confidentiality – Participating is Safe
Your Census response is confidential and protected for 72 years per Title 13 of the US Code. Your personal Census information cannot be shared with any one or any government agency including law enforcement, immigration, IRS, etc. Violation of Census confidentiality is punishable by five years in federal prison and/or $250,000 fine. These severe penalties protect your Census privacy. While participating in the Census is safe, knowing what to expect will help avoid potential scams and fraud. The 2020 Census is short. The Census form asks questions about housing tenure (owning/renting), phone number, number of people in the home, relationship, and name, sex, race, Hispanic/Latino origin for each person in the home. The 2020 Census does NOT ask for social security numbers, bank or credit card account numbers, money or donations, or anything on behalf of a political party. Census Enumerators are now in the field conducting 2020 Census non-response operations. All Census workers will have ID badges with their photograph, US Department of Commerce watermark, and expiration date. Census workers will carry a hand-held device and a clearly marked US Census Bureau bag. If asked, Census workers will produce their supervisor’s contact information and/or regional office phone number for verification and a letter from the Director of the Census Bureau on US Census Bureau letterhead. A Census worker will never ask to enter your home. Your Census response is important to the future of your community, and your participation is safe.
By Nicholas Smith
The Commission regularly receives complaints against brokers caused, at least in part, by a lack of professionalism in their communications. These complaints are often a result of brokers who have acted angrily or aggressively, communicated threats, made personal attacks or who made rude or vulgar comments in person, over the phone, or online.
Social media, texting, and email are a part of everyday life, both professional and personal. The conduct of the real estate brokerage business can also be extremely fast-paced and is increasingly handled electronically. Brokers can now text, email, and post “on-the-fly,” leading to communications that, in hindsight, might have been better phrased or simply better left unsaid. Responding to a text, email or social media post in anger or frustration can often exacerbate a problem in a transaction instead of reducing tensions.
Social media like Facebook and Twitter began as platforms for personal interactions. These platforms and those like them are now used both for personal activities and for advertising and branding professional services. Increasingly, the Commission is receiving complaints about brokers posting offensive content on social media. Posts that someone may consider offensive (e.g. discriminatory, political, angry rants, etc.) may not only damage your business and reputation but may lead to complaints with consumer websites, professional groups or associations, your firm and the Commission.
Of course, not all these complaints are actionable. Brokers are entitled to express their opinions and political beliefs. Being rude is generally not enough to constitute a violation of the License Law or Commission rules. On the other hand, the Commission may reprimand, suspend or revoke the license of a broker who is unworthy to act as a broker in a manner as to endanger the public interest. This could include conduct such as threatening physical harm or violence.
As brokers continue to expand their use of social media to network and promote their businesses, brokers should carefully consider the effect of their online presence, particularly on professional pages. A firm’s broker-in-charge (BIC) should also consider using written office policies to address their broker’s conduct in communicating in person and online. The Commission expects licensed brokers to be professional, so be mindful of what you say and how you say it. Keep in mind, as a North Carolina broker, you are a representative for all brokers in our state.