CARROLL C. ANDERSON (Wadesboro) – By Consent, the Commission suspended the broker license of Ms. Anderson for a period of six months effective April 1, 2011. The Commission then stayed the suspension for a probationary period of six months. The Commission found that Ms. Anderson, while her license was under an active suspension effective November 15, 2007 and permitted only to work as an unlicensed assistant in the office where she had been broker-in-charge, spoke with several buyers and at least one potential seller-client about their transactions, leading the parties to believe that Ms. Anderson was actively licensed and acting as a broker.
LOIS W. BLACK (Wadesboro) – By Consent, the Commission suspended the broker license of Ms. Black for a period of 30 months effective September 1, 2010. Six months of the suspension were active with the remainder stayed for a probationary period of 24 months. The Commission found that Ms. Black, acting as dual agent for a property listed at $44,900 in October 2004, increased the price to $50,000 in March 2005; that property went under contract with a buyer for $50,000, and closed at $54,000; and that Ms. Black did not have a written renewal or agreement to support the price increases. The Commission also found that Ms. Black provided buyers in two transactions with funds for closing costs without disclosing this to the lender and was repaid after the sales by the sellers. Finally, the Commission found that a seller in a transaction agreed to accept $4,500 in settlement of $18,000 owed in seller financing with Ms. Black’s firm collecting the payments and that the buyers were subsequently held liable for a demand of over $16,000 when Ms. Black’s ledger stated the amount owed was $1,540.
JENNIFER JAYNE BRIGHT (Mooresville) – By Consent, the Commission suspended the broker license of Ms. Bright for a period of six months effective April 1, 2011. The Commission then stayed the suspension for a probationary period of six months through October 1, 2011. The Commission found that Ms. Bright in 2006 sold her own property and subsequently served as listing agent when the purchaser sought to resell the home 10 months later at a $45,000 increase in price; that Ms. Bright included in her file disclosure and waiver statements which were in dispute with other representations in a contract to purchase and which the buyers had no memory of signing. The Commission also found that Ms. Bright denied being a dual agent and claimed to represent only the seller despite written agreement to the contrary in the file.
CHIRICO HUBER PROPERTIES LLC (Charlotte) – By Consent, the Commission suspended the firm license of Chirico Huber Properties for a period of two years effective March 15, 2011. One year of the suspension is active with the remainder stayed for a probationary period of one year. The Commission found that a broker-owner of Chirico Huber Properties converted approximately $100,000 in earnest money deposits and other funds in the firm’s trust account to cover operating expenses. The Commission noted that the funds were replaced.
CLEAR WATER MARKETING LLC (New Bern) – The Commission accepted the permanent voluntary surrender of the firm license of Clear Water Marketing effective March 11, 2011. The Commission dismissed without prejudice allegations that Clear Water Marketing violated provisions of the Real Estate Law and Commission rules. Clear Water Marketing neither admitted nor denied misconduct.
CHARLES N. COKER (Raleigh) – By Consent, the Commission suspended the broker license of Mr. Coker for a period of three months effective March 1, 2011. The Commission then stayed the suspension for a probationary period of six months. The Commission found that Mr. Coker, acting through a company which developed and sold condominium units, misrepresented to potential purchasers the number of condominiums that would be sold to investor-purchasers and homeowner-purchasers. The Commission found that a number of purchasers bought condominiums believing that only four or five units would be sold to investor-purchasers and that Mr. Coker negotiated and sold 14 units to a single purchaser who intended to lease the units to tenant occupants.
KEVIN G. CONNER (Kitty Hawk) – The Commission revoked the broker license of Mr. Conner effective November 12, 2010. The Commission found that Mr. Conner failed to hold in a trust account and to account for security deposits totaling approximately $3,400 he received from a travel network firm. The Commission also found that Mr. Conner failed to properly maintain and produce the trust account records for a real estate brokerage firm, failed to disburse trust funds to the true owners of property in a timely manner; and failed to safeguard the funds of others when he left the office of a construction and real estate firm and abandoned the account and its records. The Commission also found that Mr. Conner operated a real estate brokerage firm when he knew the firm did not possess an active real estate brokerage license, collected property management fees and disbursed them to an account in the name of a real estate brokerage firm and advertised the firm’s services on the internet during the time when the firm’s broker license was suspended.
CONNER RESORTS, INC. (Kitty Hawk) – By Consent, the Commission revoked the firm license of Conner Resorts effective June 24, 2010. The Commission found that Conner Resorts continued to conduct real estate brokerage after its license was suspended in 2006. The Commission also found that Conner Resorts failed to maintain its trust account records in compliance with the License Law and Commission rules and failed to account for the monies it held in trust for others.
LOY J. DELLINGER (Denver) – By Consent, the Commission suspended the broker license of Mr. Dellinger for a period of two years effective January 1, 2011. One month of the suspension was active with the remainder stayed for a probationary period of one year. The Commission found that Mr. Dellinger pled guilty in Superior Court to the class 1 misdemeanor of obstruction of justice as the result of assisting a friend in obtaining a North Carolina driver license when the friend was not entitled to the same.
TABITHA E. ESTEP (Jonesborough, Tennessee) – By Consent, the Commission revoked the broker license of Ms. Estep effective March 10, 2011. The Commission found that Ms. Estep, while serving in 2009 as a volunteer treasurer for the Avery County Fair and Avery County Little League, used check cards from both organizations to make unauthorized purchases, and pled guilty to and was convicted of two counts of felony embezzlement in Avery County. The Commission also found that Ms. Estep, while serving in 2009 as Finance Officer for the Town of Beech Mountain, used a credit card issued to Beech Mountain to make unauthorized charges totaling in excess of $1,200 for her personal use. The Commission further found that Ms. Estep, in 2009, while serving as broker-in-charge of a homeowners’ association, established an account in the association’s name and made unauthorized charges on the account for her personal use. Finally, the Commission found that Ms. Estep’s Tennessee real estate license was revoked in May 2010 due to her failure to report her embezzlement convictions and that she failed to report the revocation to the Commission.
TERESA MARIA GRAVES GAYLE (McLeansville) – The Commission revoked the broker license of Ms. Gayle effective February 21, 2011. The Commission found that Ms. Gayle, acting as property manager for a landlord-client, collected rental payments totaling $4,600 from tenants and failed to remit the funds to her landlord-client. The Commission also found that her landlord-client eventually lost the subject property to foreclosure when she could not make her mortgage payments and filed suit and won a judgment against Ms. Gayle. Finally, the Commission found that Ms. Gayle failed to respond to Letters of Inquiry from the Commission and to provide trust account records.
STEPHANIE L. GOSEN (Monroe) – The Commission suspended the broker license of Ms. Gosen for a period of one year effective January 25, 2011. The Commission found that Ms. Gosen, acting as a buyer’s agent, failed to remit or account for an earnest money deposit received from the buyer when contracting to purchase a property. The Commission also found that Ms. Gosen failed to properly maintain records in the transaction, failed to make records available for inspection by the Commission, and failed to provide full and accurate disclosure of all information requested by the Commission within the prescribed time period.
PETER J. GREIJN (Raleigh) – By Consent, the Commission suspended the broker license of Mr. Greijn for a period of three years effective March 1, 2011. The Commission then stayed the suspension for a probationary period of five years on certain conditions. The Commission found that Mr. Greijn, broker-in-charge of a real estate brokerage firm, bid at foreclosure sales between 2002 and 2004 and then paid potential upset bidders not to file upset bids in violation of North Carolina law. The Commission noted that Mr. Greijn has paid restitution in the amount of approximately $42,000 as required by the court in a civil matter related to those sales.
MATTHEW F. HALL (Kitty Hawk) – By Consent, the Commission revoked the broker license of Mr. Hall effective June 24, 2010. The Commission found that, as the qualifying broker and president of a construction and real estate firm, Mr. Hall converted approximately $20,000 held in a trust account to his own use to pay a creditor of the firm. The Commission also found that Mr. Hall entered into a contract to purchase a property from a buyer and the evidence tends to show that Mr. Hall promised the buyer that he would make a $10,000 earnest money deposit on the contract and that the deposit would be held in his firm’s trust account; the check Mr. Hall deposited into his own trust account was returned for insufficient funds and Mr. Hall failed to disclose the dishonored check to the seller and failed to make the deposit as promised.
BILLIE C. HOFFMAN (Mooresville) – The Commission revoked the broker license of Ms. Hoffman effective May 1, 2010. The Commission found that a complainant alleged Ms. Hoffman failed to account for a $1,000 tenant security deposit paid in connection with a lease of commercial property and that Ms. Hoffman failed to respond to Commission inquiries about the complaint. The Commission also found that Ms. Hoffman failed to provide the Commission with trust or escrow account records relating to the transaction.
JOHN L. HUBER (Charlotte) – By Consent, the Commission revoked the broker license of Mr. Huber effective March 15, 2011. The Commission found that Mr. Huber converted approximately $100,000 in earnest money deposits and other funds in his firm’s trust account to cover operating expenses. The Commission noted that Mr. Huber replaced the funds.
THOMAS B. HUMINIK (Charlotte) – By Consent, the Commission suspended the broker license of Mr. Huminik for a period of six months effective December 1, 2010. Three months of the suspension were active with the remainder stayed for a probationary period of nine months. The Commission found that Mr. Huminik gave a broker associate a copy of a lender’s pre-qualification letter from a previous transaction and told him to change the information on it to create a letter needed to support a buyer’s offer in an unrelated transaction. The Commission found that Mr. Huminik was expressly authorized by the mortgage lender to create pre-qualification letters, but only when the lender had authorized pre-qualification. The Commission also found that Mr. Huminik failed to properly disclose a Driving While Impaired conviction from 1997.
JAMES MWIHIA KAMAU (Raleigh) – The Commission accepted the permanent voluntary surrender of the broker license of Mr. Kamau effective March 11, 2011. The Commission dismissed without prejudice allegations that Mr. Kamauviolated provisions of the Real Estate License Law and Commission rules. Mr. Kamau neither admitted nor denied misconduct.
SHARON M. LANEY (Carolina Beach) – By Consent, the Commission suspended the broker license of Ms. Laney for a period of six months effective March 1, 2011. The Commission then stayed the suspension for a period of two years on certain conditions. The Commission found that Ms. Laney, as broker-in-charge of a branch office of a real estate brokerage firm which acted as rental agent for the owners of vacation and long-term rental properties, failed to perform monthly reconciliations of the security deposit and rental trust accounts for a period of 120 days. The Commission noted that bookkeeping for the business of the firm was divided between the branch office and home office.
LANEY REAL ESTATE CO. (Wilmington) – By Consent, the Commission suspended the firm license of Laney Real Estate Co. effective April 15, 2011. The Commission then stayed the suspension for a probationary period of five years through April 14, 2016 on certain conditions. The Commission found that on two separate occasions in 2006, George Laney, a qualifying broker who managed and controlled the business, wrote checks on his real estate brokerage firm’s trust account for his personal real estate transactions without making contemporaneous deposits. These transactions created temporary shortfalls in the trust account that were not cured for several weeks. The Commission also found in 2007 that Mr. Laney caused more than $23,000 in abandoned client monies from his firm’s trust accounts to be disbursed without authority from former clients to his firm’s corporate account. Finally, the Commission found that Mr. Laney and others in his firm, acting as rental agents for the owners of vacation and long term rental properties, failed in 2010 in one of the firm’s offices to perform monthly reconciliations of the security deposit and rental trust accounts for a period of 120 days. The Commission noted that Mr. Laney agreed to refund the trust account and to follow the correct procedures for disbursing abandoned funds.
SETH ANTHONY LAWS (Wilmington) – The Commission revoked the broker license of Mr. Laws effective June 1, 2010. The Commission found that Mr. Laws negotiated a written referral agreement for a transaction while associated with one firm and after leaving that firm, entered into a written buyer agency agreement for the transaction, agreeing with his new broker-in-charge that the commission would be paid to his former firm. The Commission further found that Mr. Laws led the closing attorney to believe that no sales commission was to be paid to either firm and should be paid as a credit to the buyer but instead instructed his buyer-client to pay him the full $48,000 commission outside of closing.
JAMES M. LEWIS, SR. (West Paducah, Kentucky) – The Commission revoked the broker license of Mr. Lewis effective November 12, 2010. The Commission found that Mr. Lewis permitted a real estate licensee and licensed firm to operate, from the office of his company, an unlicensed property management business and to charge and collect property management fees from consumers at a time when the licenses of the licensee and the firm were both suspended.
HOWARD P. LOGUE (Sanford) – By Consent, the Commission suspended the broker license of Mr. Logue for a period of one year effective December 15, 2010. One month of the suspension was active with the remainder stayed for a probationary period of two years. The Commission found that Mr. Logue maintained a trust account for earnest money deposits and other monies belonging to his brokerage clients and customers, but failed to keep accurate records. The Commission found that Mr. Logue’s trust account records did not balance with the statements provided by his bank, that he did not regularly reconcile his records to those provided by the bank, and that his records failed to make a clear audit trail. The Commission also found that Mr. Logue’s trust account records were significantly out of balance and that he failed to safeguard the funds of others entrusted to his care.
TRUDY PARKER MASON (Trinity) – By Consent, the Commission revoked the broker license of Ms. Mason effective April 15, 2011. The Commission found that Ms. Mason, acting as bookkeeper for a real estate brokerage firm which acted as broker and rental agent for owners of rental properties, converted money belonging to clients and tenants to her own use. The Commission also found that Ms. Mason failed to safeguard and account for the funds of others in her custody and that Ms. Mason pleaded guilty to and was convicted of the offense of embezzlement in 2010.
DAVID W. MCKINNEY (Greensboro) – By Consent, the Commission revoked the broker license of Mr. McKinney effective February 15, 2011. The Commission found that Mr. McKinney, acting as broker-in-charge of a firm which provided property management services for owners of rental properties, failed to maintain client- and tenant-owned money in a trust account, failed to promptly account for and remit trust monies in his possession, failed to keep complete and accurate records of trust money, and failed to make records available for the Commission’s inspection. The Commission also found that Mr. McKinney’s and the firm’s liability for the funds of others exceeded the money on deposit in the firm’s trust accounts by at least $40,000.
MCKINNEY MANAGEMENT SERVICES, INC. (Greensboro) – By Consent, the Commission revoked the broker license of McKinney Management Services, Inc., effective February 15, 2011. The Commission found that McKinney Management Services, a firm which provided property management services for owners of rental properties, failed to maintain client- and tenant-owned money in a trust account, failed to promptly account for and remit trust monies in the firm’s possession, failed to keep complete and accurate records of trust money, and failed to make records available for the Commission’s inspection. The Commission also found that McKinney Management Services’ liability for the funds of others exceeded the money on deposit in the firm’s trust accounts by at least $40,000.
OAK ISLAND ACCOMMODATIONS, INC. (Oak Island) – By Consent, the Commission suspended the firm license of Oak Island Accommodations for a period of one year effective February 15, 2011. The Commission then stayed the suspension for a probationary period of two years on certain conditions. The Commission found that Oak Island Accommodations, a rental property management firm responsible for handling and accounting of the funds of others, failed to oversee its trust account and to reconcile the trust account records, resulting in significant discrepancies in the reconciled balance, journal balance, and property trial balance. The Commission also found that Oak Island Accommodations’ trust account records were not maintained in such a way as to create a clear audit trail.
OUTER BANKS CONTRUCTION & REAL ESTATE, INC. T/A OBC REAL ESTATE (Kitty Hawk) – By Consent, the Commission revoked the firm license of Outer Banks Construction & Real Estate effective June 24, 2010. The Commission found that Outer Banks Construction & Real Estate continued to conduct real estate brokerage after its license was suspended in 2006. The Commission also found that Outer Banks Construction & Real Estate failed to maintain its trust account records in compliance with the License Law and Commission rules and failed to account for the monies it held in trust for others.
DANILO PARRA, AKA DANILO PARRA BERMUDEZ, AKA FERNANDO PARRA BERMUDEZ (Reidsville) – The Commission permanently revoked the broker license of Mr. Bermudez effective January 31, 2011. The Commission found that Mr. Bermudez applied to become a real estate broker in May 2005 and provided personal information on his application including a name, Fernando Parra Bermudez, Social Security number, and date of birth, all of which were false, and that his true name was and is Danilo Parra Bermudez. The Commission found that Mr. Bermudez failed to disclose to the Commission on his license application certain convictions in 1987 of criminal offenses in the State of New York. The Commission also found that Mr. Bermudez was convicted in Rockingham County on or about November 27, 2006, after being licensed by the Commission and under the name of Danilo Parra Bermudez, of Driving While Impaired and failed to report the conviction to the Commission as required by Commission rules. The Commission further found that the name of Fernando Parra Bermudez and other identifying information on Mr. Bermudez’ driver’s license were false and that this information was provided in July 2006 to become affiliated with a real estate brokerage firm. The Commission found that Mr. Bermudez, as the result of an altercation on or about March 1, 2007 with the firm’s broker-in-charge, was convicted under the nameDanilo Parra on or about May 23, 2007 of assault in Rockingham County.
JEFFERY A. PASSOT (New Bern) – The Commission accepted the permanent voluntary surrender of the broker license of Mr. Passot effective March 11, 2011. The Commission dismissed without prejudice allegations that Mr. Passotviolated provisions of the Real Estate Law and Commission rules. Mr. Passot neither admitted nor denied misconduct.
CYNTHIA J. PENNY (Raleigh) – By Consent, the Commission suspended the broker license of Ms. Penny for a period of three months effective March 1, 2011. The Commission then stayed the suspension for a probationary period of six months. The Commission found that Ms. Penny, engaged by a company which developed and sold condominium units, misrepresented to potential purchasers the number of condominiums that would be sold to investor-purchasers and homeowner-purchasers. The Commission found that a number of purchasers bought condominiums believing that only four or five units would be sold to investor-purchasers and that Ms. Penny was aware that another broker with the company had negotiated and sold 14 units to a single purchaser who intended to lease the units to tenant occupants.
LEWIS L. PENNY (Raleigh) – By Consent, the Commission suspended the broker license of Mr. Penny for a period of three months effective March 1, 2011. The Commission then stayed the suspension for a probationary period of six months. The Commission found that Mr. Penny, engaged by a company which developed and sold condominium units, misrepresented to potential purchasers the number of condominiums that would be sold to investor-purchasers and homeowner-purchasers. The Commission found that a number of purchasers bought condominiums believing that only four or five units would be sold to investor-purchasers and that Mr. Penny was aware that another broker with the company had negotiated and sold 14 units to a single purchaser who intended to lease the units to tenant occupants.
TONY PHAM (Charlotte) – The Commission ordered the revocation of the broker license of Mr. Pham effective March 16, 2011. The Commission found that Mr. Pham, who procured a tenant for the owner of a rental property, prepared a lease agreement which violated North Carolina statutes by including in the agreement a provision requiring the tenant to pay an excessive late rent fee of 10 percent of the lease amount. The Commission also found that Mr. Pham failed to respond to Commission Letters of Inquiry resulting from the tenant’s complaint within 14 calendar days.
DOUG POLLARD, INC. (Wrightsville Beach) – By Consent, the Commission suspended the firm license of Doug Pollard, Inc., for a period of two years effective April 1, 2011. The Commission then stayed the suspension for a probationary period of two years. The Commission found that in September 2004, Doug Pollard, Inc., acting as agent and broker for the owner of nine properties, became aware that several of its seller-client’s properties were involved in foreclosure proceedings including one at a particular address. The Commission also found that Doug Pollard, Inc., in October 2004, learned that its seller client had sold one of the properties and was refusing to pay Doug Pollard, Inc., a commission. The Commission found that immediately following that closing, Doug Pollard, Inc., notified its seller-client in writing that it would not provide any further services. The Commission further found that Doug Pollard, Inc. during the time of representation of the seller-client, did not disclose to the seller-client the names of other parties who it also represented who purchased properties at foreclosure sales. The Commission finally found that a company controlled by Doug Pollard, Inc., bid successfully at the foreclosure sale of the seller-client’s property at a particular address and then assigned its rights to one of the firm’s buyer-clients.
JAMES D. POLLARD (Wrightsville Beach) – By Consent, the Commission suspended the broker license of Mr. Pollard for a period of two years effective April 1, 2011. The Commission then stayed the suspension for a probationary period of two years. The Commission found that in September 2004, Mr. Pollard and his firm, acting as agent and broker for the owner of nine properties, became aware that several of their seller-client’s properties were involved in foreclosure proceedings including one at a particular address. The Commission also found that Mr. Pollard in October 2004 learned that their seller-client had sold one of the properties and was refusing to pay Mr. Pollard a commission. The Commission found that immediately following that closing, Mr. Pollard and his firm notified their seller-client in writing that they would not provide any further services. The Commission further found that Mr. Pollard, during the time of representation of the seller-client, did not disclose to the seller-client the names of other parties who Mr. Pollard and his firm also represented who purchased properties at foreclosure sales. The Commission finally found that the company controlled by Mr. Pollard and his firm bid successfully at the foreclosure sale of the seller-client’s property at a particular address and then assigned its rights to one of the firm’s buyer-clients.
REFERRAL REALTY GROUP, INC. – (Raleigh) By Consent, the Commission suspended the firm license of Referral Realty Group for a period of three years effective March 1, 2011. The Commission then stayed the suspension for a probationary period of five years on certain conditions. The Commission found that Referral Realty Group, a real estate brokerage firm, engaged in two transactions between 2003 and 2005 in which it represented sellers and failed to disclose that it had business relationships with the buyers and had a financial interest in the outcome of their transactions.
THEODORE SALAME III (Bakersville) – By Consent, the Commission reprimanded Mr. Salame effective February 1, 2011. The Commission found that Mr. Salame, acting as a buyer’s agent in a transaction, was aware that payments by the seller to the buyer totaling $616 could not be credited on the HUD-1 closing statement because of the type of loan. Mr. Salame also knew that the seller paid the buyer the $616 after closing, resulting in an inaccurately documented HUD-1 closing statement.
MICHAEL D. SHELTON (Stanley) – The Commission accepted the voluntary surrender of the broker license of Mr. Shelton for a period of one year effective May 1, 2011. The Commission dismissed without prejudice allegations that Mr. Shelton violated provisions of the Real Estate License Law and Commission rules. Mr. Shelton denied misconduct.
TRIANGLE REALTY CORPORATION OF LOUISBURG (Louisburg) – The Commission accepted the voluntary surrender of the broker license of Triangle Realty Corporation for a period of three years effective March 20, 2011. The Commission dismissed without prejudice allegations that Triangle Realty Corporation violated provisions of the Real Estate Law and Commission rules. Triangle Realty Corporation neither admitted nor denied misconduct.
JOSHUA C. VINCENT (Blowing Rock) – By Consent, the Commission reprimanded Mr. Vincent effective February 1, 2011. The Commission found that Mr. Vincent, acting as broker-in-charge of a real estate brokerage firm, failed to properly supervise a bookkeeper who had access to the firm’s bank and trust accounts and removed monies belonging to the firm, its principals and its clients and converted them to personal use. The Commission also found that Mr. Vincent failed to property maintain the firm’s trust accounts and account records. The Commission noted that Mr. Vincent restored the more than $20,000 removed from the firm’s trust accounts.
JENNIFER H. WILLIFORD (Goldsboro) – The Commission accepted the voluntary surrender of the broker license of Ms. Williford for a period of three years effective April 19, 2011. The Commission dismissed without prejudice allegations that Ms. Williford violated provisions of the Real Estate License Law and Commission rules. Ms. Williford neither admitted nor denied misconduct.
FREDERICK O. YATES (Fayetteville) – By Consent, the Commission suspended the broker license of Mr. Yates for a period of two years effective December 1, 2010. Three months of the suspension were active with the remainder stayed for a probationary period of 21 months. The Commission found that Mr. Yates acted as a buyer’s agent in a transaction which failed to close; that, in connection with the contract, the buyer wrote three checks: one for an earnest money deposit written to the listing agent and two with blank payee lines for Mr. Yates to designate the property payee; and that Mr. Yates subsequently made both checks payable to himself and endorsed them without depositing the funds in his firm’s trust account. The Commission noted that Mr. Yates refunded the buyer all monies including the original $500 deposit, which was released to the seller upon termination of the contract, and that Mr. Yates has ceased performing credit repair services for buyer-clients.
Clarification
In the March, 2011 issue of the North Carolina Real Estate Bulletin it was reported that broker Pamela Berry approved the unauthorized disbursement of more than $23,000 from the trust account of the real estate company where she was associated. In fact, the money was disbursed from the firm’s trust account to its operating account during 2007 at the direction of a broker-owner of the firm. Following an audit by the Commission, the money was restored to the trust account.
This article came from the May 2011-Vol42-1 edition of the bulletin.
A real estate broker’s permissible role in a short sale transaction and the newly revised addenda to the standard residential Offer to Purchase and Contract form will be major topics of the 2011-2012 Real Estate Update Course.
Other topics will address when it is acceptable for a real estate broker to provide a broker price opinion and not risk violating North Carolina appraiser license laws, pertinent issues in residential property management, changes in the North Carolina Real Estate License Law that impact licensees, resources relating to green building, and the requirements to maintain a current, active license.
Given the increasing frequency of short sale transactions, brokers should develop a firm understanding of the limitations on services they may provide to sellers and buyers to avoid the unauthorized practice of law. Issues relating to short sales are discussed in this issue of the Bulletin on page 4. A general discussion of the topic appeared in the May 2009 issue of the Bulletin and may be quickly accessed from the Commission Web site search page by typing in “short sales” in the Google search field.
While the current year’s Update Course addresses the January 2011 Standard Form 2-T, Offer to Purchase and Contract, the 2011-2012 Update Course will discuss key addenda including the Back-Up Contract, and the Contingent Sale, Short Sale, and possibly Additional Provisions addenda, as well as the Due Diligence Request and Agreement.
Discussion of residential property management issues will cover summary ejectment actions and issues relating to it and other recent changes in landlord-tenant law.
The 2011-2012 Update Course will be available as of July 1, to allow any inactive licensee wants to reactivate their license to first complete necessary education.
Brokers who practice primarily in the commercial arena are reminded that there is a commercial version of the mandatory Update Course usually available by September of each license year. All brokers, without exception, must have either the Real Estate Update Course or the “Real Estate Update-Commercial” Course as one of their two required continuing education courses every year in order to have a license on active status the following July 1.
* * * * *
2011-2012 BICAR COURSE
The Commission has asked sponsors not to schedule the 2011-2012 BICAR Course prior to August 2011 as no broker will need the class immediately. Any broker, who loses BIC status or eligibility as of July 1, should:
1) Do whatever is necessary to go back to active status on Commission records; 2) Re-declare as a BIC by sending Form 2.04; 3) Wait to receive a letter from the Commission telling the broker what special BIC education is needed within 120 days of re-declaring as a BIC.
Do not take any special BIC education until after you have officially re-declared as BIC by sending Form 2.04 to the Commission.
This article came from the May 2011-Vol42-1 edition of the bulletin.
By Pamela R. Rorie, Continuing Education Officer
An eager crowd of 218 real estate instructors and school officials from across the state attended the Commission-sponsored 2011 Real Estate Educators Conference in Raleigh, March 7-8, 2011.
Larry Outlaw, Director of Education and Licensing, opened the conference with a summary of the significant revisions to the 2011-2012 North Carolina Real Estate Manual. Mr. Outlaw also presented the updated syllabi for the three postlicensecourses and gave a progress report on the real estate license examination program.
Following Mr. Outlaw was a lively agency disclosure discussion and role play using the Working With Real Estate Agents brochure presented by Thomas Mahlum, DREI, with assistance from Kandyce Ellis, Travis Everette, and Sam Pyrtle.
Another highlight of the morning’s program was a joint presentation on the new Offer to Purchase and Contract by Miriam Baer, the Commission’s Executive Director, Tricia Moylan, Legal Education Officer, and George Bell, DREI and member of the Joint Forms Committee. The trio discussed the history and rationale for the contract changes, pinpointed potential problem areas regarding the use of the new form, and gave attendees the opportunity to ask questions about teaching its use to licensees.
During the first day’s luncheon, the North Carolina Real Estate Educators Association (NCREEA) held its spring meeting under the direction of President Jo-Ann C. Lavecchia. Following the business meeting, the traditional awards presentation was officiated by Immediate Past President Tim Terry. The Association presented its “Program of the Year” award to George Bell for his continuing education elective course, The NCAR Residential Forms, and its “Educator of the Year” award to co-honorees Cindy Chandler and Garth Dunklin.
Also during the luncheon, Commission Chairperson Marsha Jordan presented the Commission’s Billie J. Mercer Excellence in Education Award to NCREEA’s Educators of the Year, Cindy Chandler and Garth Dunklin. This award is presented annually in memory of former Commission member and chairperson, Billie Mercer, who was especially dedicated to the cause of real estate education. The names of all award winners are engraved on the Mercer Award cup that is displayed in the Commission’s lobby. Commission members Everett “Vic” Knight and Alice Mosteller also attended the award presentation.
Later in the day, Lisa McQuillen, Education and Licensing Officer, informed the group about the new online broker license application process. Ms. McQuillen also reminded instructors and private school directors about license renewals, and recognized prelicensing schools and instructors whose students had exhibited outstanding performance on the license examination.
Afterwards, Kristi Matthews of Advanced Energy presented Green and Energy Efficient Homes – What You Need to Know, which informed attendees of requirements for a home to be designated “green.” The first day’s program concluded withPamela Vesper, Auditor/Investigator, who presented suggestions for the electronic handling of trust accounts.
On the second day, Karen Hamilton of the North Carolina Americans with Disabilities Act Network discussed ADA requirements when real estate prelicense students and/or exam candidates request special accommodations. Next, Continuing Education Officer Pamela Rorie discussed proposed topics for the 2011-2012 Update and BICAR courses, gave a status report on current continuing education projects, and reminded instructors and CE sponsors of upcoming renewal deadlines.
The conference concluded with the highly anticipated “Miscellaneous Legal Issues and Open Forum” session presided over by Commission Legal Counsel Tom Miller, who outlined proposed legislative changes and then took questions on a variety of topics including broker price opinions and short sales.
The Commission thanks North Carolina’s real estate educators for their continued interest and support, and congratulates Cindy Chandler, Garth Dunklin, and George Bell for their achievements.
This article came from the May 2011-Vol42-1 edition of the bulletin.
By Charlene D. Moody, Deputy Legal Counsel
With the decline in the economy over the last several years, the “short sale” transaction has increased in popularity. Licensees are listing a larger number of “short sale” properties and buyer-clients are seeking supposed bargains.
Brokers and buyers must remember that a seller is always free to sell their property for less than the remaining amount due on the seller’s mortgage loan as long as the seller is able to come to closing with the difference in order to extinguish the mortgage lien. In general, that is known as a “short sale”, but it does not require approval or participation by the seller’s lender. For purposes of this article, a “short sale” transaction occurs when the seller’s lender agrees to extinguish the lien for less than the amount due, allowing the seller to sell the property free and clear of the mortgage lien but without paying off the full balance due on the loan. There are several issues of which licensees should be aware in order to avoid short sale pitfalls.
THE LENDER MAY RELEASE THE LIEN BUT STILL HOLD THE SELLER LIABLE FOR THE REMAINING AMOUNT DUE ON THE LOAN (THE “DEFICIENCY”). Sellers in short sales must be made aware that they may be on the hook for any deficiency and just because a bank will allow the sale of the home does not mean that they will be left without owing the debt. A lender may accept the short sale amount and release the lien but refuse to consider it a full and final settlement of the debt. Brokers working with sellers should make certain the seller determines whether or not the lender will hold them liable for the deficiency before the short sale is completed. Conversely, if the lender agrees to forgive the remaining debt, the seller may face tax consequences because this debt forgiveness may be treated as income for tax purposes. Finally, a short sale transaction may affect the seller’s credit score and ability to purchase another home for a period of time. Licensees should encourage sellers to discuss these issues in detail with their attorney and tax advisor before deciding to do a short sale. An attorney may be able to assist an owner in pursuing options other than a short sale (such as a loan workout, refinance, deed-in-lieu of foreclosure, bankruptcy, or loan modification).
AT WHAT POINT DOES A CONTRACT IN A SHORT SALE BECOME A BINDING CONTRACT? The North Carolina Association of REALTORS® has created a short sale addendum for both the standard form listing agreement and offer to purchase and contract. When these forms are used, lender approval is simply an additional contingency to the contract. At the point that both the buyer and seller have signed the contract and the seller’s acceptance has been communicated to the buyer, the parties are in a binding contract subject to the contingency of the lender’s approval of the short sale. Brokers representing sellers in a short sale situation where the standard form is NOT being used should advise their seller clients to have an attorney review the contract before they sign and be sure the seller can be released if the lender does not approve the short sale.
LENDER APPROVAL IS REQUIRED AND CAN BE COMPLICATED. Each lender may have different document and eligibility criteria to determine whether a short sale transaction will be allowed. Generally, a lender will require proof that the borrower is incapable of paying off the loan and that the lender will fare better through a short sale than through the foreclosure process. Sometimes, being upside down on the loan (owing more on the loan than current fair market value) is enough, but the lender may still choose to evaluate the seller’s financial circumstances to confirm that his or her resources are truly insufficient to cover the loan amount. Additionally, all debt and costs must be ascertained in order to determine the feasibility of a short sale. These debts include the amount of the delinquent loan, any home equity or other loans recorded against the property, past due HOA fees, and unpaid property taxes. The costs of the sale include any agreed closing costs (if allowed by the lender), escrow fees, and brokerage commissions. If a seller has more than one lien against the property, a short sale may require the approval of other lenders.
BROKERS SHOULD TRY TO IDENTIFY POTENTIAL SHORT SALE SITUATIONS PRIOR TO TAKING THE LISTING TO AVOID SURPRISES ONCE THE PROPERTY GOES UNDER CONTRACT. Listing brokers must remember that it is a material fact that a seller cannot complete a transaction without doing a short sale and this must be disclosed to a buyer prior to contract even if the information may harm the seller’s bargaining position. Similarly, if the listing broker learns a short sale is required after the contract is signed, or if the property goes into foreclosure while under contract, the listing broker has a duty to inform the buyer. Brokers should also remind sellers and buyers that short sales are uncertain. A lender is not obligated to approve a short sale transaction and may choose not to involve the seller or his listing broker in the decision-making process.
SELLERS AND LISTING BROKERS SHOULD BE ON THE LOOKOUT FOR SCAMS INVOLVING SHORT SALES. These may include the buyer retaining a third party to negotiate a short sale, requesting that the seller execute a power of attorney for another party or not contact the lender themselves, large upfront fees, and guarantees to stop foreclosure. “Flopping” is a newly coined word for certain scams involving short sales. “Flopping” occurs when a seller or buyer (and/or his broker) convinces a lender to accept a short sale transaction while concealing from the lender the fact that another offer at a higher price is already lined up. The buyer then quickly resells the property for a profit. New regulations have been created to prevent flopping, including 90 day bans on resales.
LENDERS WHO AGREE TO A SHORT SALE TYPICALLY TRY TO HAVE A SAY IN THE AMOUNT OF BROKERAGE COMMISSION PAID AND MAY NOT ALWAYS BE WILLING TO APPROVE A SHORT SALE IF BROKERS TAKE THEIR USUAL FEE. Listing brokers should be careful to accurately represent the commission they will pay to cooperating brokers and disclose that the amount of compensation may be adjusted based on the lender’s requirements for approval of the short sale.
BUYER BROKERS SHOULD ADVISE BUYER-CLIENTS ABOUT THE PROCESS AND CONSEQUENCES OF A SHORT SALE. A buyer broker should remember that just because the asking price of the property is below the payoff amount of the loan, there is no guarantee that the property is worth even the asking price. Brokers should take special care in assessing value in declining markets. In addition, a lender may not consider a short sale until a contract has been signed by buyer and seller. Once the parties submit a contract, the lender may take a long time to make a decision and may reserve the right to change the terms at the last minute. Moreover, a seller in a short sale transaction may not be financially able to make any repairs so the transaction is likely to be “as-is”. The listing broker is allowed to continue marketing the property and may receive other offers which must be communicated to the seller and the seller’s lender. Remember that the lender has a financial interest in the property and is being asked to take less than the amount owed. The lender therefore has the right to full disclosure of all offers. If another offer is more attractive in price or terms, the lender may not approve the first contract and require the seller to accept the later offer. Buyers must be patient, willing to wait, and understand that they could lose the property at any time before closing.
* * * * *
In summary, short sales involve significant risk to both sellers and buyers. Sellers may face many financial issues before, during and after the closing. The buyer must understand that not all short sale are bargains, short sales are generally not short transactions, and just because the parties have signed a contract does not mean that the buyer will get the house. Brokers should be well versed on these types of transactions before engaging in a short sale and should fully disclose all potential issues to their clients.
This article came from the May 2011-Vol42-1 edition of the bulletin.
The Commission regrets the passing of William C. Lackey, Jr., of Cornelius. He was a member of the Commission from 1999 to 2006 and a former Vice Chairman.
This article came from the March 2011-Vol41-3 edition of the bulletin.
By Stephen Fussell, Consumer Protection Officer
In the course of answering numerous telephone inquiries and investigating complaints filed against brokers, the Commission’s legal staff has identified some issues which, if handled properly, can help maintain good relationships between property managers and their owner-clients.
1. Have a written property management agreement and operate within the authority granted by the agreement. Commission Rule A.0104(a) requires a broker to enter into a written property management agreement before beginning to manage an owner-client’s property. The agreement should include all terms and conditions including when rent proceeds will be sent to the owner-client, the extent of the background checks for prospective tenants, the frequency of inspections and authorization for repairs .
2. Inquire about the status of the mortgage on rental property (if applicable). In today’s economy, foreclosures have become common. Before accepting a rental property, a broker should ask the owner whether the mortgage is current, whether the rent proceeds will cover the mortgage payments and whether the owner has sufficient funds to cover the mortgage payments in the event that the rental property becomes vacant or the tenant stops paying rent.
3. Verify the qualifications (i.e. income, credit, rental history, etc.) of a prospective tenant before renting the property. Thorough background checks of prospective tenants may reduce the risk of non-payment of rent, early termination of leases and property damage by tenants.
4. Perform move-in and move-out inspections and make periodic inspections during each tenancy. Document in writing and with photographs (when necessary) the condition of a rental property before and after each tenancy. This will help assign responsibility for damages to the property.
5. Deposit all monies collected into a trust account before disbursing to owners, vendors or to yourself for management fees. Brokers are prohibited from depositing rent monies or security deposits directly into an owner-client’s account. All monies collected by a broker in the course of managing an owner-client’s property are trust monies and must be deposited into the broker’s trust account.
6. Remit rent proceeds to owners in a timely manner. Brokers should allow sufficient time for rent checks to clear their respective banks and then promptly disburse rent proceeds to the owner-clients. The broker’s policy should be clearly set forth in the property management agreement.
7. Keep owner-clients informed regarding tenant issues (i.e. non-payment of rent, damages, etc.) and financial issues. A broker should notify the owner-client immediately regarding repairs, nonpayment of rent and other serious issues affecting the rental property. Accurate monthly statements will provide the financial information needed by owner clients.
8. Maintain properties in safe and habitable condition and obtain authorization for repairs exceeding the amount set out in the management agreement. A property owner and his agent are responsible for maintaining residential rental properties in safe and habitable condition. This means that repairs, safety issues and conditions such as insect infestations should be addressed promptly. Property management agreements should indicate the extent of the broker’s authority to take corrective action. If a broker agrees to contact an owner regarding corrections that will exceed a certain cost, then this agreement should be specified in the property management agreement.
9. Limit deductions from security deposits to those allowed by the Tenant Security Deposit Act and educate owner-clients to expect normal wear and tear. Brokers must use good judgment and be reasonable when determining whether to charge a tenant.
10. Retain copies of property management agreements and leases for three years from the date on which the broker stops managing a property. All information and documentation acquired by a broker during the course of managing an owner’s property must be furnished to the owner if requested by the owner. A broker cannot withhold information or documentation from his client.
While this list is not intended to be all-inclusive, it addresses the issues most often raised by rental property owners and tenants. Paying attention to these issues will enable brokers to better represent their owner-clients, to be more responsive to tenants and lessen the risk that they will become the subject of an investigation.
This article came from the March 2011-Vol41-3 edition of the bulletin.
The Commission’s Broker-in-Charge Annual Review (BICAR) course is designed for and restricted to currently designated brokers-in-charge and brokers who are broker-in-charge eligible. A broker who is not a broker-in-charge or who is not broker-in-charge eligible will not receive credit for the BICAR course.
A broker becomes broker-in-charge eligible only after he or she has been designated as a broker-in-charge and has completed the Commission’s 12-hour Broker-in-Charge course. A broker may then maintain BIC eligibility indefinitely, (even when not serving as a broker-in-charge) by:
• timely renewing his or her license;
• taking the Broker-in-Charge Annual Review (BICAR) course each license period; and
• taking the mandatory annual Update course each license period.
From time to time a broker who has lost his or her designation or eligibility will take the course and not fully understand why he or she is not receiving continuing education credit. If you believe yourself to be a broker-in-charge or broker-in-charge eligible, please go to the Commission’s Web site, www.ncrec.gov, select “Licensees Only” from the menu on the left side of the Homepage and check your status. Eligible brokers will be able to login and select a “BIC Eligible Document” verifying their current eligibility status. All others will not have this option available to them. If you are unable to print a “BIC Eligible Document” from this area of the Web site and feel that your record is incorrect, please contact the Commission’s Information Services Section at 919-875-3700, Ext. 772.
A broker may lose his or her status or eligibility to serve as a broker-in-charge for any of the following reasons: 1) the broker’s license expires or the broker’s license is suspended, revoked or surrendered; 2) the broker’s license is made inactive for any reason, including failure to satisfy the continuing education requirements; 3) the broker fails to complete the Broker-in-Charge Annual Review Course; or 4) the broker is found by the Commission to have not possessed the experience required at the time of either initial designation as a broker-in-charge or re-designation as a broker-in-charge.
Please take the time to consult the Commission’s Web site prior to taking the BICAR course to verify that the Commission’s records reflect that you are indeed a broker-in-charge or broker-in-charge eligible to ensure you will receive continuing education credit.
This article came from the March 2011-Vol41-3 edition of the bulletin.
By Janet B. Thoren, Legal Counsel
The License Law has always required brokers to disclose known conflicts of interest, and to avoid working on behalf of one party in a transaction without the knowledge of each party for whom the broker acts. Listing agents are required to set their compensation with their clients in the written listing agreement. Buyer agents must do the same in the Buyer Agency Agreement. From time to time, however, issues have arisen related to compensation and the appearance of impropriety in the manner in which licensees are often compensated.
In 2007, a newspaper article reported that certain buyer agents were receiving large bonuses from homebuilders/sellers as incentives to steer buyer clients to particular builders’ properties. The brokers involved failed to disclose these bonuses to their buyer clients. This raised a concern that seller-paid incentives could cause brokers to direct their buyer clients to certain properties where the agent might receive extra compensation without the buyer’s knowledge, rather than showing the buyer other properties that might also have suited the buyer’s needs, perhaps at a lower price.
• 2007 INCENTIVE DISCLOSURE ADVISORY COMMITTEE
In response, the Commission formed an Incentive Disclosure Advisory Committee and charged it with determining whether changes in the Real Estate Commission’s rules were needed to reasonably assure that real estate purchasers and sellers are properly informed of any compensation received by or offered to their brokers from another party to the transaction. The committee, which consisted of brokers, educators, attorneys, and a representative from the Consumer Protection Division of the Attorney General’s office, found that there were promotions by builders and developers offering bonuses or special incentives to certain real estate brokers representing buyers without adequate disclosure to those buyers. These incentives ranged anywhere from $2,000 – $10,000 in cash, trips, or other prizes for selling particular properties. In most cases, the prices of the homes were increased to cover the cost of the bonus or incentive, meaning the buyers unknowingly paid the bonuses. Sometimes the incentives were disclosed to the buyer, but in other instances, they were not. The committee recommended that the Commission’s disclosure rule should be amended to clarify that:
• Disclosure of all compensation, including bonuses and incentives, should be made to the broker’s client in writing, should be prominent, and should be acknowledged by the client;
• The value of any incentive should be disclosed and, if other than cash, described; and
• Disclosure should be timely (preferably while showing properties for which incentives are offered) but in no event not later than the time of offer.
After an investigation into the transactions that were the subject of the newspaper article, the Commission took disciplinary action against the brokers and firms involved for which sufficient evidence was discovered. The compensation disclosure rule, A .0109, was amended as a result of the committee’s recommendations. The rule as amended requires agents to do the following:
1. A broker in a sales transaction cannot be compensated by his client unless that compensation is provided for in a written agency contract meeting the requirements of Commission rule A.0104. Buyer agents and listing agents need written agency agreements in every transaction that provide for compensation.
2. A broker in a sales transaction cannot receive any compensation, incentive, or bonus of more than nominal value from any other party unless the broker provides full and timely disclosure of the payment or incentive, or the promise or expectation of such payment or incentive, to the broker’s principal. This disclosure can be oral, but must be confirmed in writing before an offer is made or accepted by the principal.
3. Full disclosure requires a description of the compensation, incentive, or bonus, including its value and the identity of the party by whom it will or may be paid. The value can be expressed using a specific dollar figure, percentage or other mathematical formula. It is not sufficient to describe compensation as being any amount “up to” a certain amount, or “between” two figures. Disclosure is timely if it is made in sufficient time to aid a reasonable person’s decision-making. To be timely to a buyer, the disclosure should be made at the time of showing if at all possible, but if not, at least prior to the submission of an offer.
The rule does not require a broker to disclose to a person who is not the broker’s principal the compensation the broker expects to receive from the principal. It also does not require a broker-associate, for example, to disclose to his or her principal the portion of compensation the broker-associate might receive from his employing brokerage firm.
The rule serves two policies. First, a consumer is entitled to know what the consumer will owe his own broker in connection with the consumer’s real estate transaction. In addition, a consumer is entitled to know when his own broker is being paid by someone else in the transaction, and how much the broker is to receive if the consumer completes the transaction. If a broker stands to make a bonus if he sells a property in a particular subdivision, the buyer has a right to know and to decide whether or not the buyer wants to see homes outside the subdivision that might not offer the same bonus, but might be comparable and may be listed at a lower price.
• HOW DO BROKERS DISCLOSE COMPENSATION?
Whether the principal is a buyer or seller, compensation should be provided for in the required written agency agreement. If a buyer agent discovers a bonus or incentive is being offered on a property after the agency agreement has been executed, the disclosure can be made by any written means including email or subsequent written note.
• LISTING AGENT DISCLOSURE
Listing agents are required to have written agency agreements with their seller clients. The NCAR standard form listing agreement provides a place to disclose to the seller principal the listing broker’s (firm’s) compensation.
• BUYER AGENT DISCLOSURE
The same is true for buyer agents. They are required to have written agency agreements with their buyer clients, and compensation can be disclosed in that agreement. NCAR has a standard exclusive buyer agency agreement that provides a place for disclosure of compensation. The form also indicates that the buyer agent may be offered additional compensation in the form of a bonus or incentive. The buyer agent or firm must still disclose the details of any bonus or incentive in writing prior to the time of the offer. NCAR has provided a new form for the disclosure of incentives or bonuses discovered after the agency agreement has been executed.
• SUBAGENTS AND DISCLOSURE
What if you are handling the transaction for the buyer, but you are not a buyer agent, you are a subagent of the seller? No disclosure is necessary. Your principal is the seller, and he or she should have already received disclosure through the listing agent. If you have thoroughly discussed agency with the buyer, and the buyer has signed the Working With Real Estate Agents brochure which indicates you are a subagent of the seller, the buyer should understand that you do not represent him or her.
• DUAL AGENCY/DESIGNATED AGENCY
What compensation must a dual agent disclose? Remember that in most cases, the firm owns the listing and the buyer agency agreement, not the individual agents working the transaction. Disclosure to the seller is not an issue if it is done as part of the written listing agreement. Since the firm represents both the buyer and the seller, however, and since the firm is being paid by the seller, it must make a full compensation disclosure to its buyer client. This means the full amount of compensation or bonuses the firm is receiving from the seller.
EXAMPLE: An agent working with a buyer may not know at the time of showing or at the time an agency agreement is signed with the buyer the full amount of commission on each property listed by the firm, plus any other incentives. Firms must make this information available to their brokers so disclosure can be made at the time of showing. If the information is not available at the time of the showing, the agent should make a good faith estimate of the firm’s compensation and then follow up with full disclosure before an offer is made. If a broker assisting the buyer discovers a bonus is being offered at some point after the initial disclosure, the broker must disclose the bonus to the buyer immediately in writing. Emailing the buyer is a sufficient means of disclosure.
• WHAT ABOUT SPECIAL TYPES OF FEES?
EXAMPLE: A builder offers brokers incentives based on the number of properties sold. For example, when the individual broker sells 5 properties belonging to the builder, he receives a bonus of $5,000.00. The broker must disclose to his buyer client that the builder offers such an incentive, the amount of the incentive, and the fact that if the buyer purchases the property in question, the broker will either receive the bonus or have a future chance at receiving the bonus.
EXAMPLE: A builder offers a firm incentives based on the number of properties sold. For example, when brokers with a certain firm sells 10 properties belonging to the builder, the firm receives a bonus of $10,000.00. If the firm represents the buyer either exclusively or in a dual agency situation, the firm must disclose the incentive arrangement with the buyer. An individual broker with the firm who knows or should know about the bonus is also required to disclose.
EXAMPLE: A builder may pay a brokerage firm a fee for marketing a subdivision. These types of fees are sometimes paid to the brokerage firm at closing as each property sells. In such situations, a broker must disclose to his or her client that the firm receives fees for marketing the subdivision and that the fees are paid upon the closing of each property, and the amount to be paid based on the sale of the subject property.
• WHY CAN’T BROKERS JUST DISCLOSE “EXTRA” COMPENSATION IN ADDITION TO THEIR COMMISSION?
In order to require only disclosure of “extra” compensation, the Commission would first have to establish what constitutes a base-rate of compensation. Since the Commission cannot set commission rates, nor can brokers lawfully agree among themselves as to a base-rate (because of federal anti-trust laws), it is impossible to require brokers to disclose only “extra” compensation. A broker could simply add the incentive to the base-rate in the transaction, call it all commission, and disclose nothing to the buyer.
• 2010 INCENTIVE DISCLOSURE IMPLEMENTATION ADVISORY COMMITTEE
In 2010, the Commission convened an Incentive Disclosure Implementation Advisory Committee to evaluate complaints and criticisms of the incentive disclosure rule and to recommend changes, if necessary, to disclosure requirements in dual agency transactions. The committee concluded that many brokers misunderstand the current disclosure rule and believe the rule is limited to a disclosure of additional or incentive compensation, and do not understand that in a dual agency situation, the firm must disclose total compensation to the buyer client. A majority of the committee concurred that full disclosure should remain the rule, including dual agency transactions, where the greater risks to the buyer also arise.
As with everything else, the amount of any incentive or bonus, whether cash or a non-cash item such as a trip, must be disclosed on the HUD-1 closing statement.
• POTENTIAL FOR DISCIPLINARY ACTION FOR FAILURE TO DISCLOSE COMPENSATION
With all the disclosure requirements, the Commission will look at all the facts and circumstances surrounding a particular transaction before making a decision as to whether a broker acted inappropriately in disclosing compensation. Some of the factors that would be considered in connection with a complaint that a consumer was not given full and timely disclosure of the firm’s compensation as required by the rule include:
• whether the broker gave the consumer a good faith estimate and how close the estimate was to the actual compensation paid;
• whether the broker had any reason to suspect the compensation might be different than disclosed;
• whether the compensation received was more, or less, than the amount disclosed;
• what systems were in place by the firm to make the information available;
• whether the broker utilized the firm’s systems but, because of unusual circumstances, was unable to obtain the necessary information;
• whether the failure to disclose was exceptional, or the standard operating procedure of either the broker or the firm; and
• all other relevant facts and circumstances concerning the particular transaction.
The Commission will not generally impose discipline against a licensee who has made an error acting in good faith, particularly when the licensee has taken reasonable steps to obtain and disclose the correct information, and when any error was corrected without harm or significant risk to a member of the public.
This article came from the March 2011-Vol41-3 edition of the bulletin.
ADAM W. O’NEAL AND ASSOCIATES (Belhaven) – By Consent, the Commission reprimanded Adam O’Neal and Associates effective December 1, 2010. The Commission found that Adam W. O’Neal and Associates failed to maintain its trust account records in accordance with Commission rules, failed to perform monthly reconciliations, and failed to remove earned commissions from the accounts in a timely manner.
ALEXANDER ARGIROFF (Kitty Hawk) – By Consent, the Commission suspended the broker license of Mr. Argiroff for a period of two years effective December 1, 2010. The Commission then stayed the suspension for a probationary period of two years through December 1, 2012. The Commission found that Mr. Argiroff, acting as qualifying broker and broker-in-charge of his licensed firm, engaged in credit repair consulting through his firm with an out-of-state company, collecting from clients fees for “consulting services” purported to be refundable if the client was “denied”, and failed to deposit the fees in a trust account, but forwarded a percentage to the out-of-state company while retaining his portion of the payment.
PAMELA BERRY (Wilmington) – By Consent, the Commission suspended the broker license of Ms. Berry for a period of one year effective December 1, 2010. The Commission then stayed the suspension for a probationary period of one year through November 30, 2011. The Commission found that Ms. Berry, acting as broker-in-charge of a real estate brokerage firm, failed to keep complete and accurate trust account records and failed to reconcile their trust records with statements supplied by the bank. The Commission also found that Ms. Berry approved the disbursement of more than $23,000 in client monies from the firm’s trust account without the authority of the firm’s clients. The funds were restored to the trust account.
BRASS LANTERN REALTY LLC (Swansboro) – By Consent, the Commission reprimanded Brass Lantern Realty effective December 1, 2010. The Commission found in a spot-audit performed by a Commission investigator that Brass Lantern Realty failed to maintain its trust accounts in accordance with Commission rules and monthly reconciliations had not been performed as required. The Commission noted that Brass Lantern Realty employed an accountant to correct the trust accounts and no shortages where found once the records were properly reconciled.
GENE R. DAVIS (Gastonia) – By consent, the Commission suspended the broker license of Mr. Davis for a period of one month effective January 1, 2011. The Commission then stayed the suspension for a probationary period of six months. The Commission found that Mr. Davis, primarily a commercial real estate agent, participated in three residential transactions involving a family member in which he failed to obtain written agency agreements as required by Commission rule.
GENE DAVIS REALTY COMPANY (Gastonia) – By consent, the Commission suspended the firm license of Gene Davis Realty Company for a period of one month effective January 1, 2011. The Commission then stayed the suspension for a probationary period of six months. The Commission found that Gene Davis Realty Company, engaged primarily in commercial real estate, participated in three residential transactions involving a family member of the broker-in-charge in which it failed to obtain written agency agreements as required by Commission rule.
MONTE NELSON GRANDON (Charlotte) – By Consent, the Commission suspended the broker license of Mr. Grandon for a period of two years effective January 1, 2011. The Commission then stayed the suspension for a probationary period of two years on certain conditions. The Commission found that Mr. Grandon was convicted on or about February 1, 2008 and May 6, 2010 of Driving While Impaired in three separate instances. The Commission noted that Mr. Grandon has participated in both inpatient and outpatient treatment for addiction and regularly attends AA meetings.
GIAN HASBROCK (Raleigh) – By Consent, the Commission suspended the broker license of Mr. Hasbrock for a period of one year effective December 1, 2010. One month of the stay was active with the remainder stayed for a probationary period extending through December 30, 2011. The Commission found that while Mr. Hasbrock acted as broker-in-charge of a real estate firm between January and September of 2007, the firm’s trust accounts were not properly funded and the books and records did not comply with Commission rules. The Commission also found that the firm’s owners primarily controlled the trust accounts during Mr. Hasbrock’s tenure as broker-in-charge; that an owner of the firm entered into a contract to purchase property owned by one of the firm’s clients; that the $10,000 earnest money check the firm’s owner gave the firm for the transaction was dishonored by his bank; and that Mr. Hasbrock did not notify the firm’s seller client or require the firm’s owner to make the check good. In addition, the Commission found that the firm’s owner did not complete the purchase and the firm’s client could not obtain a forfeiture of the earnest money as the client demanded.
GEORGE S. LANEY (Wilmington) – By Consent, the Commission revoked the broker license of Mr. Laney effective February 1, 2011. The Commission found that Mr. Laney, on two separate occasions in 2006, wrote checks on his real estate brokerage firm’s trust account for his personal real estate transactions without making contemporaneous deposits, which created shortfalls in the trust account that were not cured for several weeks. The Commission also found that Mr. Laney in 2007 caused more than $23,000 in abandoned client monies from his firm’s trust accounts to be disbursed to his firm’s corporate account without his former clients’ authority. The Commission finally found that Mr. Laney and others in his firm, acting as rental agents for the owners of vacation and long term rental properties, failed in 2010 in one of the firm’s offices to perform monthly reconciliations of the security deposit and rental trust accounts for a period of 120 days. The Commission noted that Mr. Laney has agreed to refund the trust account and to follow the correct procedures for disbursing abandoned funds.
JOHN JERRY MASS (Franklin) – By Consent, the Commission revoked the broker license of Mr. Mass effective January 14, 2011. The Commission found that Mr. Mass, as broker-in-charge during 2004-2008 of a real estate brokerage firm, listed and sold lots and homes in a subdivision developed by an entity owned and controlled by Mr. Mass, failed to provide purchasers with a disclosure required by law that the subdivision streets were privately owned, failed to pave its streets after having promised to do so, failed to follow the approved subdivision plan, and violated sedimentation and erosion control regulations. The Commission also found that Mr. Mass failed to maintain complete records of the sale of subdivision properties in the files of the firm where he was broker-in-charge, failed to account to the firm for commission monies in transactions involving the sale of subdivision properties, and used a firm credit card for personal expenses without authority. The Commission finally found that Mr. Mass, for a time the treasurer of the subdivision property owners association with dominion and control over the association’s money, failed to deposit and maintain the money in a trust account and failed to account to the association for the money or produce records of its disposition.
KRISTI ANN MORROW (Greenville) – By Consent, the Commission suspended the broker license of Ms. Morrow for a period of six months effective January1, 2011. The Commission then stayed the suspension for a probationary period of six months. The Commission found that Ms. Morrow entered into a lease agreement with the Section 8 tenant for an $800/month rental unit which had a Section 8 cap of $650/month; at the tenant’s request Ms. Morrow prepared and presented to the Section 8 representative a second lease for $650 and the tenant paid the additional $150/month out-of-pocket directly to the landlord through Ms. Morrow’s firm. The Commission also found that Ms. Morrow failed to confirm with the Section 8 representative that the payment directly to the landlord was permissible; it was not.
SHELLEY DENISE MORROW (Weaverville) – The Commission suspended the broker license of Ms. Morrow for a period of six months effective November 3, 2010. The Commission found that Ms. Morrow failed to report a DWI conviction of June 18, 2009 within 60 days as required by Commission rule and failed to respond to a Letter of Inquiry from the Commission.
ADAM W. O’NEAL (Belhaven) – By Consent, the Commission suspended the broker license of Mr. O’Neal for a period of one year effective December 1, 2010. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Mr. O’Neal, acting as Qualifying Broker and Broker-in-Charge of his licensed firm, failed to maintain his firm’s trust account records in accordance with Commission rules, failed to perform monthly reconciliations, and failed to remove earned commissions from the accounts in a timely manner.
DIANNE S. PERRY (Wilmington) – By Consent, the Commission suspended the broker license of Ms. Perry for a period of two years effective October 1, 2010. The Commission then stayed the suspension for a probationary period through September 30, 2013. The Commission found that Ms. Perry, acting as broker-in-charge of her sole proprietorship, failed to maintain her trust account in compliance with the Real Estate License Law and Commission rules, engaged in deficit spending, and failed to maintain security deposits she held on personal rentals in a trust account. The Commission noted that Ms. Perry has corrected the violations relating to her trust account records.
ERNEST H. PITT (Winston-Salem) – By Consent, the Commission revoked the broker license of Mr. Pitt effective February 9, 2011. The Commission found that Mr. Pitt was indicted in U.S. District Court in a scheme to defraud the Housing Authority of Winston-Salem and found guilty on July 21, 2009, after a trial, of two counts of mail fraud, and was sentenced to one year and one day in Federal prison.
LISA ANN REVIS (Mooresville) – By Consent, the Commission suspended the broker license of Ms. Revis for a period of three years effective July 1, 2010. Six months of the suspension were active with the remainder stayed for a probationary period of 30 months. The Commission found that Ms. Revis, while associated with a licensed firm, established a new corporation with the North Carolina Secretary of State without the knowledge of her supervising broker-in-charge. The Commission also found that Ms. Revis advertised properties for sale and rent through her corporation’s Web site before the corporation obtained a firm license or had a broker-in-charge, prepared an offer to purchase and contract through the unlicensed firm, and falsely indicated on the contract that the firm held the earnest money deposit in its trust account when Ms. Revis, instead, shredded the check and the buyers brought cash to the closing. In addition, the Commission found that Ms. Revis, after her corporation was licensed, advertised properties listed with her former firm, although the former firm had not agreed to terminate those listings, and falsified an earnest money deposit check in a transaction which was not accepted by the seller.
LINDA L. SCHAFER (Cornelius) – By consent, the Commission suspended the broker license of Ms. Schafer for a period five months effective December 1, 2010. The Commission then stayed the suspension for a probationary period of five months. The Commission found that Ms. Schafer acted as a dual agent for a property with a septic system and permitted as a four-bedroom, two-bathroom, single-family residence and which she advertised as a three-unit apartment building with five bedrooms and three bathrooms, relying solely on tax records for her information. The Commission further found that the septic system failed after the transaction and the buyer was required to upgrade the system at a cost of $5,000 or allow the property to be condemned.
DAVID C. SNIPES (Ashland, Virginia) – By Consent, the Commission reprimanded Mr. Snipes effective December 1, 2010. The Commission found that Mr. Snipes was convicted of one count of misdemeanor embezzlement which he reported in a timely manner to the Commission. The Commission also found that Mr. Snipes reported the conviction to the Virginia Real Estate Board and entered into a Consent Order which included a fine and a required four-hour ethics course. The Commission noted that Mr. Snipe’s conviction stemmed from HVAC services he performed for which he billed the client’s employer, at the client’s direction, and that Mr. Snipes did not benefit personally or corporately from the events surrounding the embezzlement charge and cooperated fully with the investigation.
SOUTHERN CHARM REALTY, INC. (Mooresville) – By Consent, the Commission suspended the firm license of Southern Charm Realty for a period of one year effective July 1, 2010. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Southern Charm Realty advertised properties for sale and rent through its Web site before obtaining a firm license or having a broker-in-charge. The Commission also found that Southern Charm Realty advertised properties listed with a different firm although the other firm had not agreed to terminate those listings and Southern Charm Realty’s associated broker falsified an earnest money deposit check in a transaction which was not accepted by the seller.
CAROLINE M. THOMAS (Rockingham) – By Consent, the Commission reprimanded Ms. Thomas effective December 1, 2010. The Commission found that Ms. Thomas, qualifying broker and broker-in-charge of a licensed firm, failed to comply with Commission rules relating to the maintenance and supervision of the firm’s trust accounts from which a broker formerly associated with the firm embezzled approximately $85,000 in cash rental payments. The Commission noted that Ms. Thomas provided satisfactory evidence of having personally replaced the trust account funds and is now maintaining and supervising the firm’s trust accounts in accordance with Commission rules.
THOMAS REALTY COMPANY OF ROCKINGHAM (Rockingham) – By Consent, the Commission reprimanded Thomas Realty Company of Rockingham effective December 1, 2010. The Commission found that Thomas Realty Company failed to comply with Commission rules relating to the maintenance and supervision of its firm’s trust accounts from which a broker formerly associated with the firm embezzled approximately $85,000 in cash rental payments. The Commission noted that Thomas Realty Company provided satisfactory evidence that its broker-in-charge personally replaced the trust account funds and is now maintaining and supervising the firm’s trust accounts in accordance with Commission rules.
REID W. THOMPSON (Asheville) – By Consent, the Commission suspended the broker license of Mr. Thompson for a period of one year effective October 1, 2010. The Commission then stayed the suspension for a probationary period of one year. The Commission found Mr. Thompson, broker-in-charge of a real estate brokerage firm, failed to disclose on his 1999 application for licensure a 1994 criminal conviction for having unsealed wine/liquor in his vehicle and a 1997 criminal conviction for resisting a public officer. The Commission also found that Mr. Thompson failed to report three criminal convictions after licensure: a 1999 conviction for possession of drug paraphernalia, a 2001 conviction for possession of marijuana, and a 2004 conviction for second degree trespass.
THOMAS P. TROLLINGER (Winston-Salem) – By Consent, the Commission revoked the broker license of Mr. Trollinger effective January 14, 2011. The Commission found that Mr. Trollinger was indicted in United States District Court, Middle District of North Carolina, in a scheme to defraud the Housing Authority of Winston-Salem. The Commission also found that Mr. Trollinger pled guilty to one count of making false statements and was sentenced, on certain conditions, to two years’ probation.
KENNETH BRAD WALSER (Mooresville) – By Consent, the Commission suspended the broker license of Mr. Walser for a period of three years effective November 15, 2009. One year of the suspension was active with the remainder stayed for a probationary period of two years. The Commission found that Mr. Walser entered into a contract to purchase a property with the intent of acquiring it as an investment, but submitted a loan application indicating he intended to occupy the property as his primary residence, which was a false statement and the transaction did not close. The Commission also found that Mr. Walser had been disciplined by the Charlotte Regional REALTOR Association in the same matter.
This article came from the March 2011-Vol41-3 edition of the bulletin.
The entire text of the Commission’s brochure, Questions and Answers on: Purchasing Coastal Real Estate, has been revised to reflect recent changes to statutes and rules.
It is recommended that you replace any existing Coastal Real Estate brochures with the new one.
Orders may be placed online at the Commission’s Web site, www.ncrec.gov, by selecting the “Free Publications” order form or by printing an order form and mailing or faxing it to the address and fax number on the form.
This article came from the March 2011-Vol41-3 edition of the bulletin.