Previously given only to persons taking the Broker-in-Charge Course, the Real Estate Commission is now making its Broker-in-Charge Guide available to all real estate licensees and interested persons.
The recently revised and redesigned Guide is required reading for anyone who wishes to become the broker-in-charge of a real estate office. What administrative duties are imposed on the broker-in-charge? What supervisory functions must be performed? What are a broker-in-charge’s responsibilities regarding trust accounts? These and many other questions are answered in this informative publication.
Also now available is the latest edition to the Commission’s popular series of “questions and answers” brochures–Questions and Answers on: Real Estate Closings.
Designed to answer many of the questions frequently asked by purchasers about residential real estate closings, the pocket-sized publication covers such topics as loan commitment letters, property inspections, title insurance, deeds, homeowner associations, and closing statements.
For information on purchasing the Broker-in-Charge Guide and Real Estate Closings brochure, see page of this Bulletin or the Commission website (www.ncrec.state.nc.us).
This article came from the November 2004-Vol35-2 edition of the bulletin.
By Emmet R. Wood Director, Audits and Investigations
If you are the broker-in-charge of a real estate office and need to open a bank account to deposit trust funds, the bank account:
For more information on opening trust accounts, please see the Trust Account Guidelines, Section IV under TRUST ACCOUNTS.
This article came from the November 2004-Vol35-2 edition of the bulletin.
GEORGE B. ALLEN (Cherryville) – By Consent, the Commission revoked the broker license of Mr. Allen effective August 6, 2004. The Commission found that Mr. Allen pled guilty in September 2003 in United States District Court to three felony counts involving the possession and distribution of cocaine and was sentenced to 21 months in prison. The Commission also found that Mr. Allen pled guilty in December 2000 to two misdemeanor violations of hunting laws in Gaston County and failed to report these to the Commission as required and, in August 1984, was found guilty of misdemeanor communicating threats and trespass without a license in Gaston County. The Commission noted that Mr. Allen voluntarily disclosed the felony criminal convictions.
ATLANTIC INLAND PROPERTIES, INC. (Greensboro) – The Commission revoked the firm license of Atlantic Inland Properties effective June 1, 2004. The Commission found that Atlantic Inland Properties, a real estate firm, failed to properly deposit and maintain on deposit in designated trust or escrow accounts all funds received for others and failed to account for those funds to their owners. The Commission also found that Atlantic Inland Properties acted outside the supervision of the firm’s broker-in-charge, continued to receive funds of others while on inactive status, allowed unlicensed persons to have access to and withdraw money from a trust account of the firm and undertook to manage a property when the firm had no authority to do so.
JOSEPH W. BELL (Pollocksville) – By Consent, the Commission revoked the salesperson license of Mr. Bell effective September 9, 2004. The Commission found that Mr. Bell failed to timely report convictions in 2002 for driving while impaired and assault on a government official in connection with a domestic dispute, and failed to respond to the Commission’s Letters of Inquiry concerning these matters.
CLIFFORD G. BLAKELY (Kill Devil Hills) – By Consent, the Commission reprimanded Mr. Blakely effective September 10, 2004 on condition that he not engage in association management while licensed by the Commission. The Commission found that Mr. Blakely, as broker-in-charge of a real estate firm engaged in association management, failed to maintain records for association funds in the manner required by Commission rule.
BLUEGREEN CAROLINA LANDS, LLC (Boca Raton, Florida) – By Consent, the Commission reprimanded Bluegreen Carolina Lands effective July 19, 2004. The Commission found that Bluegreen Carolina Lands failed to accurately answer a question on its firm application regarding the license history of its sole shareholder.
MARY ANN BOWERS (Sherrills Ford) – By Consent, the Commission suspended the salesperson license of Ms. Bowers for a period of three months effective July 1, 2004. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Ms. Bowers, as a salesperson with a real estate brokerage firm, obtained written listing agreements on behalf of another broker and real estate brokerage firm without the knowledge of her broker-in-charge. Ms. Bowers then left the firm with which she had been associated and went to work for the other firm.
ANTHONY R. BRIGGS (Southport) – By Consent, the Commission revoked the broker license of Mr. Briggs effective August 1, 2004. The Commission found that Mr. Briggs, as broker-in-charge and principal broker of a real estate brokerage firm, failed to maintain funds belonging to real estate clients and customers in a trust account, failed to maintain adequate records of said funds and converted money belonging to others to his own use. Mr. Briggs neither admitted nor denied the Commission’s findings.
NEAL A. CHASTAIN, II (Dillsboro) – By Consent, the Commission accepted the one-year voluntary surrender of the broker license of Mr. Chastain effective July 19, 2004. The Commission dismissed without prejudice allegations that Mr. Chastain had violated provisions of the Real Estate License Law and Commission rules. Mr. Chastain neither admitted nor denied misconduct.
COASTAL CAROLINAS REALTY, INC. (Ocean Isle) – By Consent, the Commission reprimanded Coastal Carolinas Realty effective June 30, 2004. The Commission found that Coastal Carolinas Realty failed to maintain trust account records accurately and in compliance with Commission rules between August 2000 and August 2002. The Commission noted that Coastal Carolinas Realty subsequently undertook corrective measures to bring the trust account records into compliance.
SHIRLEY D. COLEMAN (Dillsboro) – By Consent, the Commission suspended the salesperson license of Ms. Coleman for a period of six months effective July 1, 2004. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Ms. Coleman, as a buyer agent, agreed to accept as payment of her commission a promissory note secured by a deed of trust and made payable personally to her rather than to the real estate brokerage firm with which she was associated. The Commission noted that Ms. Coleman has acknowledged that any commission is due the firm rather than her personally and has agreed to assign the note to the firm.
CONCEPT 2000 REALTY, INC. (Raleigh) – By Consent, the Commission revoked the firm license of Concept 2000 Realty effective August 1, 2004. The Commission found that Concept 2000 Realty, acting as a real estate broker for sellers, failed to advertise as promised the properties it listed and abandoned its clients. The Commission also found that Concept 2000 Realty refused to respond to a Letter of Inquiry concerning complaints made by the clients. The Commission noted that Concept Realty 2000 refunded to one client certain monies paid to it as fees.
MARY P. COOPER (Fayetteville) – By Consent, the Commission suspended the salesperson license of Ms. Cooper for a period of one year effective July 1, 2004. The Commission then stayed the suspension for a probationary period of two years. The Commission found that Ms. Cooper had exclusive control of the property management trust account and without the benefit of supervision from her broker-in-charge, failed to reconcile the trust account on a monthly basis and failed to maintain evidence of any attempt to reconcile the account. The Commission also found that Ms. Cooper engaged in deficit spending from the property management trust account.
ROBERT J. CRAIG (Hiwassee) – By Consent, the Commission suspended the broker license of Mr. Craig for a period ninety days effective July 1, 2004. The Commission then stayed the suspension for a probationary term. The Commission found that Mr. Craig submitted an offer to purchase a lot to the seller and then neglected to notify the buyers of the seller’s acceptance of the offer. The Commission also found that Mr. Craig inaccurately informed the seller that the buyers would not qualify for financing.
JAMES DAVID DUNAWAY (Cashiers) – By Consent, the Commission suspended the broker license of Mr. Dunaway for a period of one year effective November 1, 2004. Six months of the suspension were to be active with the remainder stayed for a probationary period. The Commission found that Mr. Dunaway failed to disclose on his application for a broker license by reciprocity a 1979 criminal conviction for aggravated assault in Louden County, Tennessee. The Commission also found that in August, 2000, Mr. Dunaway received a deferred prosecution and was placed on probation after pleading guilty to two counts of theft by conversion stemming from his handling of money borrowed from lenders in support of his automobile leasing business. The Commission noted that Mr. Dunaway was cooperative throughout the Commission’s investigation.
FIVE STAR REALTY, INC. (Fayetteville) – By Consent, the Commission suspended the firm license of Five Star Realty for a period of one year effective July 1, 2004. The Commission then stayed the suspension for a probationary period of two years. The Commission found that Five Star Realty’s rental trust account was short $1,700 and that Five Star Realty failed to perform monthly reconciliations or prepare monthly trial balances, and routinely collected less than the full amount of tenant security deposits.
DAVID B. GLADNEY (Fayetteville) – By Consent, the Commission suspended the broker license of Mr. Gladney for a period of one year effective July 1, 2004. The Commission then stayed the suspension for a probationary period of two years. The Commission found that Mr. Gladney, while principal broker and broker-in-charge of a real estate firm, failed to respond to Letters of Inquiry. The Commission also found that Mr. Gladney’s rental trust account was short $1,700 and that he failed to perform monthly reconciliations, and routinely collected less than the full amount of tenant security deposits.
HARVEY W. GOUCH (Cornelius) – The Commission revoked the broker license of Mr. Gouch effective October 1, 2004. The Commission found that Mr. Gouch, as a licensed broker failed to completely and adequately respond to letters of inquiry from the Commission, failed to create and maintain records of a real estate transaction, failed to make those records he did have available to the Commission upon request, and failed to provide the purchaser in the transaction with a copy of the purchase contract at the time the contract was entered and after receiving partial payment of $11,000 for the property.
RONALD S. GREENE (Winston-Salem) – By Consent, the Commission accepted the voluntary permanent surrender of the broker license of Mr. Greene effective July 28, 2004. The Commission dismissed without prejudice allegations that Mr. Greene had violated provisions of the Real Estate License Law and Commission rules. Mr. Greene neither admitted nor denied misconduct.
SANDRAHOLLIDAY-HOWELL (Wilmington) – By Consent, the Commission revoked the broker license of Ms. Holliday-Howell effective June 17, 2004. The Commission found that, while serving as broker-in-charge of a real estate firm, Ms. Holliday-Howell and a broker associate wrote checks against the firm’s operating account without authority and that she converted over $60,000 to her own benefit.
DONALD W. HOWARTH (Bald Head) – By Consent, the Commission reprimanded Mr. Howarth effective June 1, 2004. The Commission found that Mr. Howarth, acting as listing agent in a transaction, did not fully investigate and relate accurate property boundaries to buyers. As a result, the buyers purchased a vacant lot other than the one they intended to purchase. The Commission noted that Mr. Howarth entered into a satisfactory settlement with the buyers, enabling them to secure the property they originally intended to purchase, and that the buyers have listed other properties they own with Mr. Howarth’s firm.
J&W ENTERPRISES, INC. (Dillsboro) – By Consent, the Commission accepted the one-year voluntary surrender of the firm license of J&W Enterprises effective May 1, 2004. The Commission dismissed without prejudice allegations that J&W Enterprises had violated provisions of the Real Estate License Law and Commission rules. J&W Enterprises neither admitted nor denied misconduct.
ROBERT D. JONES (Raleigh) – By Consent, the Commission suspended the salesperson license of Robert D. Jones for a period of nine months effective May 11, 2004. The Commission then stayed the suspension for a probationary period of nine months. The Commission found that Mr. Jones failed to disclose certain criminal convictions between the years 1987 and 1995 on his 1998 salesperson license application. The Commission noted that Mr. Jones did disclose the convictions on his 2003 broker application.
JORDAN LAKE PRESERVE CORPORATION (Pittsboro) – By Consent, the Commission reprimanded Jordan Lake Preserve Corporation effective July 19, 2004. The Commission found that Jordan Lake Preserve Corporation failed to accurately answer a question in its firm license application regarding the prior history of its sole shareholder. The Commission noted that Jordan Lake Preserve Corporation, on its own initiative and before the Commission was aware of the error, voluntarily disclosed the error and submitted corrected information.
BONNIE L. KEELING (Snow Camp) – The Commission revoked the salesperson license of Ms. Keeling effective June 1, 2004. The Commission found that Ms. Keeling, as principal of a real estate firm, failed to properly deposit and maintain on deposit in designated trust or escrow accounts all funds received for others and failed to account for those funds to their owners. The Commission also found that Ms. Keeling acted outside the supervision of her broker-in-charge, continued to receive funds of others while on inactive status, allowed unlicensed persons to have access to and withdraw money from a trust account of the firm and undertook to manage a property when she had no authority to do so.
ERIC S. KENNEDY (Mount Olive) – By Consent, the Commission suspended the salesperson license of Mr. Kennedy for a period of six months effective June 16, 2004. The suspension was then stayed for a probationary period of six months. The Commission found that Mr. Kennedy failed to disclose two misdemeanor convictions on a 1993 application to the Commission. The Commission also found that Mr. Kennedy failed to disclose three additional misdemeanor convictions (all related to driving) after he was licensed. The Commission noted that Mr. Kennedy properly revealed his criminal history in connection with his broker license application.
SHARON M. LANE a/k/a SCARLETT SIMMONS (Raleigh) — By Consent, the Commission revoked the broker license of Ms. Lane effective September 30, 2004. The Commission found that Ms. Lane used the alias ScarlettSimmons. She listed both names as officers and directors on her firm license application and thereby obtained her license by false or fraudulent representation. The Commission also found that Ms. Lane knowingly operated her firm under a new name without meeting the Commission’s name change requirements. In 1998, Ms. Lane deeded property under the name Scarlett Simmons and falsely told the closing attorney that Scarlett Simmons was her mother. In 1999, she gave a creditor a deed of trust in the name Scarlett Simmons and then notarized her own signature using the notary certificate issued in the name Sharon Lane. Finally, the Commission found that Ms. Lane obtained driver licenses and social security numbers in both names.
LOGGERHEAD REALTY, LLC (Southport) – By Consent, the Commission revoked the firm license of Loggerhead Realty effective August 1, 2004. The Commission found that Loggerhead Realty failed to maintain funds belonging to others in a trust account and failed to maintain adequate records of said funds. Loggerhead Realty neither admitted nor denied the Commission’s findings.
ELIZABETH B. MARKHAM (Raleigh) – By Consent, the Commission reprimanded Ms. Markham effective July 1, 2004. The Commission found that Ms. Markham, acting as listing agent for a residential property, failed to discover and disclose information about a planned road construction project that would impact the property, even though MLS listings for other properties in the subdivision included such disclosures. The Commission noted that Ms. Markham cooperated with the Commission in the investigation of the matter and voluntarily entered into a civil settlement with the purchaser.
PATRICK L. MCSWAIN (Gastonia) – By Consent, the Commission suspended the salesperson license of Mr. McSwain for a period of six months effective June 17, 2004. The Commission then stayed the suspension for a probationary period of six months. The Commission found that Mr. McSwain failed to disclose on his 2003 salesperson license application two misdemeanor convictions.
GERRARD A. MILLER (Charlotte) – By Consent, the Commission reprimanded Mr. Miller effective August 1, 2004. The Commission found that Mr. Miller failed to disclose a 1996 conviction of the misdemeanor charge of injury to real property on both his 1999 salesperson license application and on a 2003 license reinstatement application. The Commission noted that Mr. Miller did submit a criminal record check, as required by the new application, which revealed the conviction.
KRISTI A. MILLER (Sanford) – By Consent, the Commission suspended the broker license of Ms. Miller for a period of six months effective June 1, 2004. One month of the suspension is to be active with the remainder stayed for a probationary period of 12 months under certain conditions. The Commission found that Ms. Miller, as broker-in-charge of a real estate brokerage firm, failed to maintain the firm’s trust account records in compliance with the Real Estate License Law and Commission rules, resulting in an overage in the account. The Commission noted that Ms. Miller’s license was on inactive status at the time of its order.
KAREN FAITH MIMS (Four Oaks) – By Consent, the Commission reprimanded Ms. Mims effective September 1, 2004. The Commission found that Ms. Mims, as a real estate broker and certified appraiser, performed approximately eight appraisals containing inaccurate or incomplete information and submitted them to lenders to be used for purposes of obtaining loans.
MORRISON FAMILY REALTY, INC. (Raleigh) – By Consent, the Commission revoked the firm license of Morrison Family Realty, Inc., effective September 30, 2004. The Commission found that Morrison Family Realty, in applying for a firm broker license in 1998, listed two different names as officers and shareholders of the corporation when the names actually represented one person, thus obtaining a firm license by false and fraudulent representation. The Commission also found that in 1999 the firm notified the Commission of a change in its corporate name and, when informed of the items it was required to submit to the Commission to change the name, failed to submit the required items and proceeded to operate under the new name anyway.
AMANDA W. PEELER (Mebane) – By Consent, the Commission suspended the salesperson license of Ms. Peeler for a period of one year effective July 28, 2004. The Commission found that Ms. Peeler failed to disclose a 1999 misdemeanor criminal conviction of “indignities to a police officer” on both her salesperson and broker license applications.
ELLA PETERSON-ROMAN (Greensboro) – By Consent, the Commission revoked the broker license of Ms. Peterson-Roman effective October 1, 2004. The Commission found that Ms. Peterson-Roman, as broker and manager for owners of rental properties, failed to maintain the funds of others in her possession in a trust account, and failed to maintain the records of said funds so as to create a clear audit trail. The Commission also found that Ms. Peterson-Roman failed to account for and remit trust monies, that checks drawn on her trust account were not paid by her bank due to insufficient funds, and that her liability for money belonging to others exceeded the balance on deposit by more than $30,000.
SHERI PHARES-MORITZ (Raleigh) – By Consent, the Commission suspended the broker license of Ms. Phares-Moritz for a period of six months effective August 1, 2004. One month of the suspension was active with the remainder stayed for a probationary period of 12 months. The Commission found that Ms. Phares-Moritz, acting as a real estate broker for sellers, failed to advertise as promised the properties listed by her and abandoned her clients. The Commission also found that Ms. Phares-Moritz refused to respond to a Letter of Inquiry concerning complaints made by the clients. The Commission noted that Ms. Phares-Moritz refunded to one client certain monies paid to her as fees.
CHRISTIAN L. PIGOTT (Ocean Isle Beach) – By Consent, the Commission suspended the salesperson license of Mr. Pigott for a period of nine months effective October 1, 2004. Three months of the suspension are to be active with the remainder stayed for a probationary period of six months. The Commission found that Mr. Pigott, on both his July 2003 salesperson license application and September 2003 broker license application, falsely stated that he had been convicted of only one criminal offense when in fact he had been convicted of four additional offenses: Resisting a Public Officer, Possession of Marijuana, and Reckless Driving (all in 1994) and Reckless Driving to Endanger (2003).
LINDA L. REAVES (Ocean Isle) – By Consent, the Commission reprimanded Ms. Reaves effective June 30, 2004. The Commission found that Ms. Reaves, as principal broker and broker-in-charge of a real estate firm between August 2000 and August 2002, failed to maintain trust account records accurately and in compliance with Commission rules. The Commission noted that Ms. Reaves subsequently undertook corrective measures to bring the trust account records into compliance.
RICHARD G. RICOZZI (Charlotte) – By Consent, the Commission reprimanded Mr. Ricozzi effective July 1, 2004. The Commission found that Mr. Ricozzi, while an active licensed salesperson and an appraiser certified by the North Carolina Appraisal Board, failed to report to the Real Estate Commission a disciplinary action by the Appraisal Board, as required by Commission rules.
SEA RANCH REALTY, INC. (Kill Devil Hills) – By Consent, the Commission reprimanded Sea Ranch Realty effective September 10, 2004 on condition that it not engage in homeowner association management while licensed by the Commission. The Commission found that Sea Ranch Realty, a real estate firm engaged in association management, failed to maintain records for association funds in the manner required by Commission rule.
ANN S. SHIELDS (Pfafftown) – By Consent, the Commission accepted the voluntary surrender of the salesperson license of Ms. Shields for a period of five years effective July 21, 2004. The Commission dismissed without prejudice allegations that Ms. Shields had violated provisions of the Real Estate License Law and Commission rules. Ms. Shields neither admitted nor denied misconduct.
J. C. SMITH (Hickory) – By Consent, the Commission suspended the broker license of Mr. Smith for a period of six months effective July 1, 2004. The Commission then stayed the suspension. The Commission found that Mr. Smith, as principal broker and broker-in-charge of a real estate firm, did not act as the firm’s broker-in-charge and failed to supervise the salesperson employed at the firm.
BOOKER T. TATE (Durham) – By Consent, the Commission revoked the salesperson license of Mr. Tate effective August 24, 2004. The Commission found that Mr. Tate, while operating a real estate brokerage office, failed to properly deposit, maintain on deposit, account for, or remit to those entitled, the funds of others received by him in his capacity as a real estate licensee. Mr. Tate neither admitted nor denied, but did not contest, the Commission findings.
JOAN A. TERHUNE-WALDRON (Hampstead) – By Consent, the Commission revoked the salesperson license of Ms. Terhune-Waldron effective July 19, 2004. The Commission found that Ms. Terhune-Waldron, while in charge of a vacation rental trust account, failed to properly deposit and disburse the funds of others received as a licensee.
WAYNE T. YOUNTS REALTY AND CONSTRUCTION, INC. (Fayetteville) – By Consent, the Commission suspended the firm license of Wayne T. Younts Realty & Construction for a period of one year effective July 1, 2004. The Commission then stayed the suspension for a probationary period one year. The Commission found that Wayne T. Younts Realty & Construction, as a real estate firm broker, failed to maintain its trust account books and records in compliance with the License Law and Commission rules. The Commission noted that no consumers were harmed as a result and the firm’s books and records are now being maintained as required.
KATHY G. WILLIAMS (Maiden) – By consent, the Commission suspended the broker license of Ms. Williams for a period of six months effective July 1, 2004. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Ms. Williams, as broker-in-charge of a real estate brokerage firm, permitted a salesperson employed by another firm and under the supervision of that firm’s broker-in-charge, to obtain written listing agreements on her firm’s behalf without the knowledge of the salesperson’s broker-in-charge. The salesperson then left the firm with which she had been associated and went to work for Ms. Williams’ firm.
JOSEPH H. WILLIAMS (Butner) – By Consent, the Commission revoked the broker license of Mr. Williams effective July 28, 2004. The Commission found that Mr. Williams, while acting as broker-in-charge of a real estate brokerage firm, failed to properly deposit, maintain on deposit, account for, or remit to those entitled, the funds of others received by persons under his supervision in his capacity as a real estate licensee. Mr. Williams neither admitted nor denied the Commission’s findings.
ANNER E. WILLIS (Durham) – By Consent, the Commission reprimanded Ms. Willis effective July 1, 2004. The Commission found that Ms. Willis, as a real estate broker and doing business as Willis Realty, failed to maintain her trust account books and records in accordance with the Real Estate License Law and Commission rules. The Commission noted that Ms. Willis has since taken the Basic Trust Account course and changed her record-keeping to bring the accounts into compliance and that no consumers were harmed as a result of her conduct.
MARC H. WILSON (Celebration, Florida) – By Consent, the Commission reprimanded Mr. Wilson effective May 13, 2004. The Commission found that Mr. Wilson, as broker-in-charge of a real estate office, failed to deposit credit card receipts in a trust account in North Carolina, resulting in the trust account records failing to balance to the trust account bank statements. The Commission noted that no consumer funds were lost and the trust account was brought into balance.
LEROY W. YATES (Rockingham) – By Consent, the Commission revoked the broker license of Mr. Yates effective June 1, 2004, but agreed to grant an application by him for a salesperson license upon certain conditions. The Commission found that Mr. Yates, as broker-in-charge of his own real estate office, was unable to properly maintain the trust account records in the manner required by Commission rule. The Commission noted that Mr. Yates cooperated with the Commission investigation and was resolving the accounting problems by closing out his business.
WAYNE T. YOUNTS (Fayetteville) – By Consent, the Commission suspended the broker license of Mr. Younts for a period of one year effective July 1, 2004. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Mr. Younts, as principal broker and broker-in-charge of a real estate brokerage firm, failed to maintain his trust account books and records in compliance with the License Law and Commission rules. The Commission noted that no consumers were harmed as a result, and Mr. Younts’ books and records are now being maintained as required.
This article came from the November 2004-Vol35-2 edition of the bulletin.
By Janet B. Thoren, Deputy Legal Counsel
Loan fraud involves making false representations to a lender in order to obtain a loan of a larger amount or on more favorable terms than a borrower is otherwise qualified for under the lender’s guidelines.Loan fraud is a federal crime, punishable by up to 30 years in prison and $1 million in fines.In the past, most loan frauds consisted of a single transaction in which the purpose of the fraud was to get a particular buyer into a particular property that the buyer could not otherwise afford.Some examples of this single-transaction type of loan fraud include the following:
•False Gift Letter. A false gift letter is created so that it appears funds being provided to the borrower by another party are a gift, when in fact the funds are being offered as a loan and repayment is expected.
•Contract Kiting.Two contracts are created for the same transaction.One contract contains the actual terms of the agreement between the buyer and the seller.The second contract reflects a higher purchase price and is given to the lender and the appraiser in order to obtain a higher appraisal amount and permit the borrower to obtain a larger loan than he would otherwise be qualified to receive in the transaction.
•False down payment.The contract shows a large down payment made directly to the seller when in fact no down payment was made or the source of funds was not the borrower.
•Secret Second Mortgage.The buyer is not qualified to borrow the full amount needed so the seller consents to a “secret second” in which the seller or real estate agent loans additional funds to the borrower and receives a second mortgage on the property, which may or may not be recorded after closing but which is not disclosed to the lender.
•Secret Concessions or Undisclosed Rebates. The seller or broker offers concessions to the borrower for repairs, closing costs, or other items but fails to disclose these concessions to the lender or show them on the closing statement.
• False Statement of Owner Occupancy. The buyer represents to the lender that the property will be the buyer’s primary residence, when in fact the property is being purchased for rental or other investment purposes.
• False Qualifications of the Borrower. Information related to the buyer’s credit-worthiness, such as income or sources of cash, is misrepresented to the lender through false documentation or other means.
Within the last three years, the FBI’s mortgage fraud caseload in North Carolina has tripled, and real estate agents are being caught up in the newer and more sophisticated schemes.Loan fraud has advanced beyond the stage of a single transaction.Its purpose is no longer to put a single buyer in a particular home, but to intentionally steal loan funds directly from lenders.It has become a business through which a handful of individuals have made millions, but with recent arrests by federal and state authorities, those individuals are now beginning to pay the price.
In order for loan fraud to work on such a large scale, participants in the fraud typically include appraisers and mortgage loan brokers, and occasionally real estate agents and closing attorneys.The newer types of scams have different variations, but basically work like this:
•The scam organizer or promoter identifies himself or his company as a type of real estate developer or investor.The promoter selects a home, usually a new construction property, and negotiates a purchase price with the seller/builder – let’s say $200,000.This price is usually at market value, or it may be significantly lower if the home has been on the market for a while or if the promoter arranges to purchase multiple properties from the same seller/builder.Once the promoter has a property lined up, he recruits a buyer.These buyers are usually homeowners with relatively good credit, but typically don’t have enough income to purchase a second home in a legitimate transaction.
• The promoter offers the buyer the property at a greatly inflated price – for our scenario, let’s say $300,000.The written contract is usually between the seller/builder and the buyer, but reflects the $300,000 purchase price.The promoter convinces the buyer that he can purchase the home with no money down and, in most cases, even promises to give the buyer anywhere from $1,000 to $5,000 in cash outside closing if the transaction closes. The promoter promises the buyer that a tenant is ready to move into the property, and that the rent the tenant pays will be used to pay the mortgage payment.The promoter promises the buyer that the house will be sold within a relatively short period to the tenant for a huge profit, and that the promoter and buyer will then split the profits from the sale.
•Once the buyer is on board, the promoter directs the buyer to a particular mortgage broker and sometimes a closing attorney.Appraisers are used who greatly inflate the value of the property in order to substantiate the purchase price the buyer is to pay for the property.A mortgage broker creates false documents to show that the buyer intends to live in the property, to make sure the buyer appears to be qualified for the loan and to make the property appear to be worth more than the true market value.When the actual lender receives the paperwork, everything appears to be in order and the loan is approved.
•At closing, the promoterhas to make sure that he gets the profits from the loan, not the seller/builder.The seller/builder’s existing loan is paid off and he gets $200,000 for the property, less his closing costs.Closing costs may include a commission to a real estate agent that is based on the amount the seller agreed to receive, $200,000, rather than on the $300,000 purchase price shown on the HUD-1.The promoter receives the remaining funds from the loan, usually shown on the closing statement as a false second mortgage payoff or false assignment fee.Although the closing statement shows the buyer bringing funds to closing, in fact the promoter uses the funds from the loan to pay the buyer’s closing costs, and pay off the appraiser, mortgage broker, and buyer outside of closing.In the end, the promoter walks away with an average profit of $35,000 -$50,000 per transaction.
•The tenant, if there is one, pays rent to the promoter, who in many cases is running an unlicensed property management business.The promoter makes a few mortgage payments and then quits.In many cases, no tenant ever moves into the property and no mortgage payments are ever made.The buyer can’t afford to make two mortgage payments, and the property soon goes into foreclosure.The lenders can’t come close to recovering the full amount of their loans through foreclosure, and the buyer’s credit is ruined.
Banks and other lenders lose millions of dollars every year through mortgage loan fraud.Losses are often passed on to consumers through higher fees.Losses on government-insured loans end up being paid for by taxpayers.Individual consumers who dreamed of a business opportunity that seemed “too good to be true” learn the truth of the old adage the hard way when their credit is ruined and in many cases they are forced into bankruptcy.In addition, because promoters have targeted certain subdivisions repeatedly, false appraisals have caused property tax values in those subdivisions to soar, leaving the few existing legitimate home purchasers in houses that are overvalued for tax purposes and stigmatizing the neighborhoods with numerous foreclosures.
The FBI and SBI have been vigorously pursuing groups of promoters across the state.Some promoters, appraisers, and mortgage brokers have already been charged and other investigations are ongoing.The U.S. Attorney’s office has made a commitment to vigorously prosecute mortgage fraud at all levels, including individuals holding professional licenses who are seen as key factors in safeguarding the system.Such professionals include real estate agents.In addition, the Real Estate Commission has taken an active role in identifying real estate agents involved in these types of transactions and taking disciplinary action when appropriate, including the revocation of licenses and pursuing injunctive relief against unlicensed participants.
Loan fraud can be disguised in many ways.Whether it’s a single transaction loan fraud or a sophisticated scam, the Real Estate Commission expects its licensees to be the guardians of consumers and lenders alike.As such, it is your responsibility to further investigate any real estate transaction in which you are involved if it appears to include possible elements of loan fraud.You are required by law to make full disclosures to all parties, including the ultimate lender, if you suspect fraudulent behavior.Failure to do so may result in disciplinary action against your license, or criminal prosecution by federal and state authorities.
This article came from the May 2004-Vol35-1 edition of the bulletin.
The highlights of Real Estate Commission rule amendments becoming effective April 1 are summarized below. For a complete text, please contact the Commission.
Property Management
Broker-in-Charge
License Renewal
License Reinstatement
Business Entities
License Exams
Pre-Licensing and Continuing Education
This article came from the March 2004-Vol34-3 edition of the bulletin.
Real estate sales and rental agents routinely find themselves in situations where they are alone with clients or customers about whom they have very little information.The very nature of showing real estate to prospective buyers and tenants who are virtual strangers can make agents, both men and women, susceptible to becoming victims of violent crimes.
Recognizing the need for greater attention to real estate agent safety, the North Carolina Association of REALTORS® and the Real Estate Commission agreed to cooperate in promoting the education of real estate licensees about agent safety.Through the leadership of the REALTOR® Association’s North Carolina Real Estate Safety Council, a North Carolina Real Estate Safety Guide has been published to assist in this educational effort.Based upon a similar publication developed by the Washington Real Estate Safety Council, the guide contains some common sense safety tips that have been compiled from crime victims and real estate associations across the country.
When you take your real estate continuing education Update course next year, you will receive a copy together with specific instruction on how to reduce your risks.Copies may also be purchased online (www.ncrec.state.nc.us).Or you may download a copy free of charge from the Commission’s website.
This article came from the March 2004-Vol34-3 edition of the bulletin.
The long-familiar paper and pencil method of taking the real estate licensing examination is slated to be retired in March in favor of testing exclusively by computer.
The Commission introduced computerized testing in October of 2000 as an option for license applicants who wanted greater flexibility in scheduling their examinations.The paper and pencil option was retained for those who preferred the traditional format in spite of its far more restrictive testing dates.
Since then, approximately 98% of applicants who must take the licensing examination have consistently elected computerized testing.The Commission offers its computerized licensing examination through PSI Examination Services. Testing is available several times per week at seven different locations in the state as well as at Norfolk , VA.
Subject to final approval of proposed administrative rule changes, the Commission’s traditional paper and pencil licensing examination is scheduled to be offered for the last time on March 27, 2004in Raleigh .Testing by paper and pencil will continue to be available as an option for applicants with disabilities who cannot take the examination on a computer.
This article came from the March 2004-Vol34-3 edition of the bulletin.
By Miriam J. Baer,
Assistant Director, Legal Services
If you use a name in your real estate business which is different from the name on your real estate license certificate (which should be your legal name), you may be in violation of the Real Estate License Law.
For example, suppose your full legal name is Midlemas Phestus Furplesnurkle, IV, but you prefer to go by “Purple” in connection with your real estate business.Your advertisements in the local homes magazine, newspaper and on the web, simply say, “For all your real estate needs, think “Purple!”Likewise, your (purple) business cards and sign riders identify you only as “Purple.”
This method of identification is insufficient under the law even if your ads, cards and stationery include your company name, address and phone number.The name under which you do business should be enough to identify you legally and to assure that you are not misleading the public as to your identity.By using only “Purple,” you are engaging in business under a name not legally your own, and thus effectively concealing your identity.While you may not intend to deceive, you do so by not using your legal name.
First Names
Nicknames have always been common, and you can certainly use one in place of your legal first name.The key is to remain readily identifiable to the public and to the Real Estate Commission.Some nicknames are short versions of a longer name and are commonly known.For example, William may go by “Will” or “Bill,” Robert by “Rob” or “Bob,” and Elizabeth by “Liz,” “Beth,” or even “Betsy.”In these kinds of situations, you may use a nickname because your actual name can be easily determined.Similarly, a nickname involving the use of initials in place of your given name is acceptable, as when Thomas Joseph Jefferson goes by “T. Joseph Jefferson” or even “T.J. Jefferson.”
Other nicknames are not logically associated with the user’s first name.For example, if your name is Midlemas Phestus Furplesnurkle and you use a nickname like “Purple” or “Kid,” a member of the public would have no way of knowing that you are actually “Midlemas.”In order to assure that you can be easily identified, your business cards and correspondence should include your full name together with your nickname.This can be done in various ways.For example, your business card might read, “Midlemas ‘Purple’ Furplesnurkle, Broker,” and your newspaper ad could say, “For all your real estate needs, call Purple! (M.P. Furplesnurkle, IV, Broker).”
Last Names
On the other hand, using a surname that is not your own is not allowed.If you have an awkward or lengthy surname, you may wish that you could shorten or simplify it only in connection with your real estate business.While the goal is understandable, the result is misleading if you haven’t legally changed your name.For instance, if your surname is Furplesnurkle, you can’t simply call yourself “Mr. Furp” or “Mr. Jones” in your brokerage activities, so long as your legal name remains Furplesnurkle.If you want to become “Furp” or “Jones,” you should legally change your name.The most straightforward way to do this is to go through a judicial name change proceeding before the clerk of court in the county where you reside.
If you don’t want to go to the trouble of changing your name legally, then you should use your legal name in all aspects of your business.You cannot avoid the problem by filing an assumed name registration in the office of the register of deeds.That procedure is only for business names–not for personal name changes.
Marital Status
But what about your wife–Mrs. Furplesnurkle.Before she married you, her maiden name was Myrtle Jones.What name can she use now?The answer depends on whether she legally changed her name upon her marriage.If she did, then she must use her new, legal name, “Myrtle Furplesnurkle.”And, she must notify the Commission that she has done so by filing a Request to Reissue Real Estate License Certificate and/or Renewal Pocket Card form to have her license reissued in her new name.(These forms, which are available from the Commission upon request, must be notarized and accompanied by a $5 fee for each document.)If she did not take your name, she should continue to use her maiden name until she legally changes it.
If she subsequently divorces you and wants to revert to her maiden name, she may apply to the clerk of court in the county where she lives.Upon resuming her maiden name, she must notify the Commission on the same form she used when she married you, pay the $5 fee and her license will be reissued in her maiden name.
If you have a question about the name you are using in real estate, call the Real Estate Commission’s Legal Services Division for assistance (919/875-3700, ext. 131).
This article came from the March 2004-Vol34-3 edition of the bulletin.
From The North Carolina Society of Surveyors, Inc.
There is a school of thought that it is not necessary to obtain a current survey when purchasing real estate–that title insurance and affidavits from sellers sufficiently protect the purchaser’s interests or that the purchaser can simply rely upon a previous survey.However, real estate agents should be aware that purchasers face potential problems typically referred to as “matters of survey” when a current field survey of property is not performed.
Matters of survey relate to anything that could negatively affect the use of property being purchased.These include encroachments across property lines or building restriction lines; fences/walls, landscaping features, wells, swimming pool decks; the location of utilities, access ways, etc. relative to easements, property lines or buildings; the existence of flood zones; and other similar matters.
It is possible that matters of survey may be covered in title insurance policies.But coverage that protects the purchaser’s interests is unlikely to be included unless a survey is performed prior to issuance of the policy. “Lender’s policies” may cover matters of survey without requiring a current survey, but they do not protect the purchaser.The risk associated with lenders’ policies is often acceptable to the title insurer because claims from a lender are not likely to occur until the purchaser defaults on the loan.
In recent years, it has become popular to have the seller sign an affidavit effectively guaranteeing that no matters of survey negatively affect the property.However, in doing so, the seller may be unwittingly accepting some unwarranted risks of liability.The buyer may also be tempted to simply rely upon a survey document from a previous transaction, but such survey may not contemplate changes to the property since the earlier survey was performed.
Many people choose not to obtain a current survey because they believe it will delay closing the transaction.This may be true if it is not ordered from the surveyor until closing of the transaction is assured.However, if the purchaser decides that a current survey is desired, it can be ordered early enough so as not to delay the closing date.
An informed purchaser knows that an accurate, current survey will provide peace of mind that cannot be obtained from any other source.
This article came from the March 2004-Vol34-3 edition of the bulletin.
More and more agents are upgrading their licenses from salesperson to broker. All it takes is completion of the 60-hour pre-license course with its in-class (not separately and independently administered) exam.
In the three years ending December 31, 2003 , the number of brokers has risen 11.7% versus a 17.7% drop in salespersons.
Brokers have lots of advantages in the practice and pursuit of business:
Brokers-in-charge of offices with a high percentage of affiliated brokers have the advantages of:
• Better-educated agents who are more knowledgeable about many crucial aspects of real estate practice and better able to satisfy consumers and reduce company risk from negligence.
• Reduced supervisory responsibilities with fewer affiliated salespersons.
• Ability to better capitalize on the trend toward agents independently performing more functions outside the office through the use of modern communications and computer technology.
• Greater prestige of an office with a high level of broker licensure.
This article came from the March 2004-Vol34-3 edition of the bulletin.