Disciplinary Actions

CAROLINA TRACE GATED PROPERTIES LLC (SANFORD) – By Consent, the Commission suspended the broker license of Carolina Trace Gated Properties LLC for a period of 12 months, effective July 1, 2022. The Commission then stayed the suspension in its entirety. The Commission found that the Firm failed to verify the advertising of a broker affiliated with the Firm, resulting in listings advertised with inaccurate square footage figures.

FATHOM REALTY NC LLC (CHARLOTTE) – By Consent, the Commission reprimanded Fathom Realty NC LLC, effective June 20, 2022. The Commission found that the Firm was the listing firm for the sale of a residential property. The individual listing agent failed to verify the property’s septic permit and advertised the property as having four bedrooms when the septic permit specified three bedrooms. The listing agent has entered into a settlement with the 2019 buyer to the buyer’s satisfaction and the buyer has now sold the property.

ALVARO JOEL VILLARROEL GOMEZ (CHARLOTTE) – By Consent, the Commission revoked the broker license of Mr. Gomez effective July 1, 2022. The Commission found that in January 2022, Mr. Gomez submitted an Affidavit for Name Change along with a NC Court Order for the name change. Mr. Gomez has not had a legal name change and knowingly submitted invalid and fraudulent documents to the Commission.

C JON HINES (CHARLOTTE) – Following a hearing, the Commission suspended the broker license of Mr. Hines for thirty-six months effective July 1, 2022, provided however, that the first twelve months shall be active and the remaining twenty-four months shall be stayed. Mr. Hines shall not hold himself out to be a broker-in-charge or become broker-in-charge eligible for a period of five years from July 1, 2022. The Commission also withdrew Mr. Hines’ instructor approval for a period of three years effective July 1, 2022. The Commission found that Mr. Hines, as broker-in-charge of a Housemax LLC, altered pre-approval letters and did not obtain approval from the lender to alter the pre-approval letters. Mr. Hines also failed to provide all firm transactional records as requested by the Commission’s investigator.

HOUSEMAX LLC (CHARLOTTE) – Following a hearing, the Commission permanently revoked the firm license of Housemax LLC effective July 1, 2022. The Commission found that Mr. Hines, as broker-in-charge of the Firm, altered pre-approval letters and did not obtain approval from the lender to alter the pre-approval letters. The Firm also failed to provide all firm transactional records as requested by the Commission’s investigator.

JOSEPH ROBERT KENDRICK (BURGAW) – By Consent, the Commission suspended the broker license of Joseph Robert Kendrick for a period of 12 months, effective July 15, 2022. The Commission then stayed the suspension in its entirety. The Commission found that Mr. Kendrick, acting as the broker-in-charge of a firm, also acted as the listing agent under a limited service agreement. Mr. Kendrick advertised the square footage of the subject property and the bedroom count based on his seller client’s assertions and without independently verifying the information by measuring the property or attempting to pull the septic permit. The seller of the subject property also made renovations to it and Mr. Kendrick failed to verify whether any required permits were pulled prior to listing. A buyer went under contract to purchase the subject property and discovered, during their due diligence, that a septic permit could not be found and that permits were not pulled during the renovation. The buyer then terminated the contract. The subject property went under contract two more times prior to Mr. Kendrick updating the MLS advertisement to reflect the septic and permit issues.

WILLIAM R MONCURE (RALEIGH) – By Consent, the Commission suspended the broker license of William R Moncure for a period of 6 months, effective July 1, 2022. The Commission then stayed the suspension in its entirety. The Commission found that Mr. Moncure, acting as a listing agent, advertised a property as a five-bedroom house based on the seller’s representation. Mr. Moncure failed to discover and disclose that the property was permitted for a three-bedroom septic. A buyer under contract to purchase the property discovered the discrepancy and the seller refused to refund the buyer’s $15,000 due diligence fee until the buyer retained counsel. Upon discovering that the permit was only for a three-bedroom septic, Mr. Moncure immediately revised his MLS listing. He also called the Commission to advise on the matter and seek guidance. The subject property has since been sold with the correct MLS listing and disclosures in place. Mr. Moncure has also entered into a civil settlement with the first buyer to the buyer’s satisfaction.

CHARLES C POWELL II (CHARLOTTE) – The Commission accepted the permanent voluntary surrender of the broker license of Mr. Powell effective July 1, 2022. The Commission dismissed without prejudice allegations that Mr. Powell violated provisions of the Real Estate License Law and Commission rules. Mr. Powell neither admitted nor denied misconduct.

ALFRED S RUSHATZ (SANFORD) – By Consent, the Commission suspended the broker license of Alfred S. Rushatz for a period of 12 months, effective July 1, 2022. The Commission then stayed the suspension in its entirety. The Commission found that Mr. Rushatz as qualifying broker and broker-in-charge of a firm, failed to verify the advertising of a broker affiliated with Mr. Rushatz’s firm. This resulted in listings advertised with inaccurate square footage figures. Mr. Rushatz engaged in the practice of law in North Carolina without a law license when he prepared a deed in a real estate transaction.

CHERIE L SCHULZ (RICHLANDS) – The Commission accepted the voluntary surrender of the broker license of Ms. Schulz effective July 20, 2022. The Commission dismissed without prejudice allegations that Ms. Schulz violated provisions of the Real Estate License Law and Commission rules. Ms. Schulz neither admitted nor denied misconduct.

CHERIE SCHULZ REALTY FIRM INC (RICHLANDS) – The Commission accepted the voluntary surrender of the broker license of Cherie Schulz Realty Firm Inc. effective July 20, 2022. The Commission dismissed without prejudice allegations that Cherie Schulz Realty Firm Inc. violated provisions of the Real Estate License Law and Commission rules. Cherie Schulz Realty Firm Inc. neither admitted nor denied misconduct.

USREALTY.COM LLP (BURGAW) – By Consent, the Commission suspended the broker license of USRealty.com LLP for a period of 12 months, effective July 15, 2022. The Commission then stayed the suspension in its entirety. The Commission found that the Firm acted as the listing agent under a limited service agreement. The Firm advertised the square footage of the subject property and the bedroom count based on its seller client’s assertions and without independently verifying the information by measuring the property or attempting to pull the septic permit. The seller of the subject property also made renovations to it and the Firm failed to verify whether any required permits were pulled prior to listing. A buyer went under contract to purchase the subject property and discovered, during their due diligence, that a septic permit could not be found and that permits were not pulled during the renovation. The buyer then terminated the contract. The subject property went under contract two more times prior to the Firm updating the MLS advertisement to reflect the septic and permit issues. The Firm has since created additional training and policies for its agents.

Staff Appearances

Dee Bigelow, Information Officer, spoke at the Greenridge Realty meeting on July 19.

Employment Opportunities Available

Are you interested in joining the staff of the North Carolina Real Estate Commission? From time to time, employment opportunities become available. They are posted on the Commission’s website under the “About Us” tab.

Click here for more information.

Opening a Real Estate Broker Trust Account

The Law:

G.S. 93A-6(g) states that “a broker’s trust or escrow account shall be a demand deposit account in a federally insured depository institution lawfully doing business in the State which agrees to make its records of the broker’s account available for inspection by the Commission’s representatives”

North Carolina Real Estate Commission Rules:

21 NCAC 58A .0117 (b) states that “a trust or escrow account shall satisfy the requirements of G.S. 93A-6(g) and shall be designated as a “Trust Account” of “Escrow Account”. All bank statements, deposit tickets and checks drawn on said account shall bear the words “Trust Account” or “Escrow Account”. A trust account shall provide for the full withdrawal of funds on demand without prior notice and without penalty or deduction to the funds.

 21 NCAC 58A .0117 (4)(c)  states “a broker may maintain a maximum of one hundred ($100.00) in company funds in the trust account for the purpose of paying service charges incurred by the account.  In the event that the services charges exceed one hundred dollars ($100.00) monthly, the broker may deposit an amount each month sufficient to cover the service charges. A broker shall maintain a separate ledger for company funds held in the trust account identifying the date, amount and running balance for each deposit and disbursement.”

Why do Brokers sometimes have difficulty opening a Real Estate Broker Trust Account at a bank or federally insured depository institution?

Sometimes a broker runs into difficulty opening a trust or escrow account at a bank or federally insured depository institution.  Most often the problem is a result of the banker requiring the broker to provide them with a formal trust agreement.

So why the confusion? It is fairly common for individuals and families to create a formal trust agreement for the purpose of distributing assets upon an individual’s death.  This may be done to protect property in an estate or to avoid probate. The person who manages a trust on behalf of a beneficiary is a trustee. So, the banker hears you want to open a trust account and then requires that the broker provide a written trust agreement to establish the account.

In real estate brokerage, the broker is a fiduciary to the people whose money is held in the trust or escrow account.  Though this fiduciary relationship exists, the broker is not a “trustee” and there is no formal trust document.

When Establishing a Trust or Escrow Account – Give the Following Information to the Banker.

1. Ask to open a business checking account (this is a demand deposit account).
2. Verify that the account is “federally insured”.
3. Have the banker designate the account(s) as a “Trust Account” or Escrow Account” by adding the designation to all bank statements, deposit tickets and all checks drawn on the account.
4. Explain that no written trust agreement is required.

The broker may need to tell the Banker that the account is similar to an attorney trust account, in that there is no trust agreement.

If the broker provides the preceding information and the banker still insists on requiring a formal trust agreement, the broker may want to consider using another bank or depository institution.  There are probably tens of thousands of real estate trust or escrow accounts in the State of NC, so it should be relatively easy to find a banker to open your real estate broker trust account.

Other Considerations or Recommendations

1. The broker can open and maintain the account with a maximum of $100 of broker or company funds for the purpose of paying service charges incurred by the account.  However, the broker does not have to have any personal or company funds in the account.  If the firm also maintains an operating account (non-trust acct) at the bank, the banker may be able to deduct any service fees incurred from the trust account from the non-trust operating account.
2. Many brokers that engage in property management prefer to open several trust or escrow accounts.  Often brokers decide to open separate accounts for tenant security deposits and rents.  Many brokers have found it beneficial to make the checks different colors, as a way to easily identify the account.

What’s Your Plan?

The sudden death or incapacity of a Broker-in-charge or Qualifying Broker can change things in an instant. What happens when the Broker-in-charge or Qualifying Broker becomes incapacitated or even dies? That depends on whether or not the Broker-in-charge (“BIC”) or Qualifying Broker (“QB”) has a Succession Plan in place.

According to a North Carolina broker who recently went through this situation, the transition can be CHAOS! You think there is always time but, suddenly, “Tom” and other brokers at the firm were thrust into a situation where they had a brokerage without a BIC/QB and without a plan. Tom’s advice to all is to have a plan in place long before you think you need one. Whether a Sole Proprietor, LLC, or Corporation, a Succession Plan is a must.

Commission Rule 58A.0512 addresses what can be done when the BIC who is a sole proprietor dies or becomes incapacitated. Upon receipt of a written notification and certified copy of a court order appointing an executor, administrator or fiduciary, the Commission can issue a temporary license, valid for one year, to the BIC’s administrator. This temporary license allows the administrator to handle the distribution of trust money held and commissions owed to the BIC/sole proprietor at the time of the BIC’s death or incapacity. But remember that this is only to wrap up the business, and to allow final disbursements. Existing listings, sales contracts, or property management agreements must be transferred to a new broker.

There is so much more to be handled and so much more to consider. What if this is not a sole proprietor but a licensed firm or a sole proprietorship with multiple affiliated brokers? What if the firm/sole proprietorship wants to continue conducting brokerage activity? In order to continue conducting brokerage activity, a new BIC (and possibly QB) still needs to be designated. Has anyone even considered who that would be and if that person is eligible to hold BIC or QB status? And will that new BIC and/or QB have all of the information needed to run the business? Will the new BIC and/or QB know where to find or have access to trust and business accounts, agency agreements, and all other information necessary to continue to run the business?

Similar to having a written firm policy and procedures manual, a Succession Plan can ensure a smooth transition in the event of an unforeseen loss. You may consider having a broker or two in training to be the new BIC, not just in the situations of death or illness, but in the event you take that extended vacation you have been dreaming about. You might consider who your firm’s qualifying broker is. Is this the same person as the BIC? Should the QB and BIC be the same person? Is there someone else who can step up as QB if a replacement is also needed?

This article is full of questions for you to consider, but you provide the answers. The bottom line is, it is your business, your plan and your decision – IF you plan ahead. Consult an attorney and accountant and decide what is best for you and your situation. Be prepared. No one wants to think of a situation where they are injured, incapacitated or pass away but if you face these possibilities early, you help your loved ones, business associates, and clients in both dealing with loss and moving forward smoothly and with as little disruption as possible.

Disciplinary Actions

BREANNE CHIZUE CONTRERAS (HUNTERSVILLE) – By Consent, the Commission reprimanded Ms. Contreras, effective May 30, 2022. The Commission found that Ms. Contreras acted as the listing agent for a residential property where she and her husband owned the LLC seller. Buyer 1 went under contract to purchase the subject property and had a home inspection performed. Buyer 1 shared the summary of the home inspection report with Ms. Contreras, but ultimately terminated during the due diligence period when his closing attorney notified him of a potential set-back issue. Ms. Contreras failed to fully disclose these material facts to Buyer 2 who went under contract to purchase the subject property and had a home inspection performed. Buyer 2’s home inspection noted some of the same issues as buyer 1’s home inspection report. Buyer 2 closed on the subject property after agreeing to a Due Diligence Request and Agreement with Ms. Contreras.

RICARDO ALBERTO CONTRERAS JR (HUNTERSVILLE) – By Consent, the Commission reprimanded Mr. Contreras, effective May 30, 2022. The Commission found that Mr. Contreras purchased residential property through his LLC and pulled permits for an interior renovation.  Although the electrical and plumbing permits were completed, the building permit status still showed “Not Finaled” [sic] on the county website. Buyer 1 went under contract to purchase the subject property, but terminated during the due diligence period when his closing attorney notified him of a potential set-back issue. Buyer 2 went under contract a month later and Mr. Contreras did not disclose the permit status nor did he disclose the potential set-back issue raised by the previous closing attorney, basing his decision not to do so on legal advice from other attorneys. Buyer 2 closed on the subject property without issue. The city zoning office advised Commission staff that a zoning violation still existed, but that it may be cured with the approval of an administrative deviation.

KRISTA MARIE CUTLER (CHARLOTTE) – By Consent, the Commission reprimanded the broker license of Ms. Cutler, effective June 20, 2022. The Commission found that in June 2019, Ms. Cutler was the broker-in-charge of the listing agent for the sale of a residential property. The individual listing agent failed to verify the property’s septic permit and advertised the property as having four bedrooms when the septic permit specified three bedrooms. The listing agent has entered into a settlement with the 2019 buyer to the buyer’s satisfaction and the buyer has now sold the property.

ELISE MARIE FREDERICH (RALEIGH) – By Consent, the Commission suspended the broker license of Elise Marie Frederich for a period of 12 months, effective June 10, 2022. The Commission then stayed the suspension in its entirety. The Commission found that Ms. Frederich, acting as the broker-in-charge of Sensational Realty Inc., failed to properly account for trust money and comingled funds resulting in an apparent overage in the firm’s trust account.

FOUND REALTY LLC (HUNTERSVILLE) – By Consent, the Commission reprimanded Found Realty LLC, effective May 30, 2022. The Commission found that Found Realty LLC acted as the listing firm for a residential property with Breanne Contreras acting as its broker-in-charge. Ms. Contreras and her husband owned the LLC seller. Buyer 1 went under contract to purchase the subject property and had a home inspection performed. Buyer 1 shared the summary of the home inspection report with Ms. Contreras, but ultimately terminated during the due diligence period when his closing attorney notified him of a potential set-back issue. Ms. Contreras failed to fully disclose these material facts to Buyer 2 who went under contract to purchase the subject property and had a home inspection performed. Buyer 2’s home inspection noted some of the same issues as buyer 1’s home inspection report. Buyer 2 closed on the subject property after agreeing to a Due Diligence Request and Agreement with the Ms. Contreras.

SANDRA GOOCH HOLLIS (RALEIGH) – By Consent, the Commission reprimanded Ms. Hollis, effective June 7, 2022. The Commission found that Ms. Hollis acted as a listing agent for the sale of her client’s home and undertook to represent them as their buyer agent in a residential purchase transaction. Ms. Hollis was aware that her client needed to use the proceeds from the sale of their current home in order to purchase their new home. Ms. Hollis, acting as a buyer agent, submitted an offer to purchase on behalf of her client and failed to have them execute an addendum to make the purchase conditioned upon the sale of her client’s current home. Instead, Ms. Hollis entered a due diligence expiration date in the contract that occurred thirty-nine (39) days after the proposed closing date. Ms. Hollis failed to notice that the executed contract she received back from the listing agent had a different due diligence expiration date, which was initialed by the seller, thus creating a counter offer. Ms. Hollis’ client subsequently issued due diligence and earnest money deposit funds and proceeded with a home inspection. The issues of whether or not a valid contract existed and the proper ownership of the Earnest Money Deposit remain in dispute between the buyer and seller.

BARBARA LYNN KATLEN (TROUTMAN) – By Consent, the Commission suspended the broker license of Barbara Lynn Katlen for a period of 6 months, effective June 10, 2022. The Commission then stayed the suspension in its entirety. The Commission found that in June 2021, Ms. Katlen acted as the listing agent for a seller-client. Just three months prior, Ms. Katlen had acted as the seller-client’s buyer’s agent for the same subject property. During the initial purchase of the subject property in March 2021, a home inspection revealed certain deficiencies in the crawl space while the crawl space was in the process of being encapsulated and remediated by the seller. Ms. Katlen confirmed no repairs were made by the sellers during their ownership and failed to disclose the crawl space issue noted in the March 2021 inspection report. An inspection conducted in July 2021 by the complaining witness buyer revealed a crawl space deficiency that had been noted in the March 2021 inspection report when Ms. Katlen acted as the buyer’s agent.

LIFESTYLE HOMES OF DISTINCTION (ASHEVILLE) – By Consent, the Commission suspended the firm license of Lifestyle Homes of Distinction for a period of 12 months, effective June 15, 2022. The Commission then stayed the suspension in its entirety. The Commission found that Lifestyle Homes of Distinction, also licensed by the NC Licensing Board for General Contractors (NCLB-GC), failed to report that, by Consent Order dated 10/21/2020, they were disciplined by the NCLB-GC. Pursuant to the Consent Order, Lifestyle Homes of Distinction’s BIC was suspended for one year with three months active, ordered to pay a $5000 fine, and ordered to complete two courses.          

R VARATHARAJU M RAMAN (CHARLOTTE) – By Consent, the Commission reprimanded R Varatharaju M Raman, effective June 10, 2022. The Commission found that Mr. Raman listed a property for sale, which he had purchased and renovated through his company. Mr. Raman failed to ensure that the required permits were pulled during the renovations. Buyer 1 went under contract to purchase the subject property and had a home inspection performed. Buyer 1 then terminated the transaction after sending a copy of their home inspection report to Mr. Raman. Mr. Raman did not make any repairs or update the property disclosure form prior to re-listing the subject property. Buyer 2 then went under contract to purchase the subject property and had a home inspection performed which revealed some of the same issues as Buyer 1’s report. Mr. Raman and Buyer 2 agreed on repairs and Buyer 2 successfully closed on the subject property. Mr. Raman failed to disclose the lack of permits to Buyer 1 and 2 at the time their offers were made and failed to disclose outstanding material issues to Buyer 2 that were discovered during Buyer 1’s inspection.

KIMBERLY A MOORE-DUDLEY (GREENSBORO) – By Consent, the Commission reprimanded Ms. Moore-Dudley, effective June 10, 2022. The Commission found that from May 15, 2019 – July 16, 2021, Ms. Moore-Dudley was broker-in-charge of a firm. In early 2021, Ms. Moore-Dudley became aware that an unlicensed LLC was receiving compensation through the firm by payment from the market center administrator. Ms. Moore-Dudley informed the market center administrator that only licensed entities could receive compensation for brokerage activities and informed the broker at issue in that scenario to properly license the LLC. Upon investigation, it was learned that additional unlicensed entities were being paid for brokerage activity at the time Ms. Moore-Dudley was broker-in-charge of the firm.

EUGENE GERARD PITZER (RALEIGH) – By Consent, the Commission reprimanded Mr. Pitzer, effective June 10, 2022. The Commission found that Mr. Pitzer entered into a listing agreement with a seller-client who disclosed that the property was part of an inheritance and, therefore, had multiple heirs who would need to agree to the sale. Mr. Pitzer relied on the seller’s representations that the other heirs had agreed to the sale, and failed to discover and disclose additional heirs who were necessary parties to the contract. A contract to buy the property was terminated when the seller was unable to get all heirs to sign off and the buyer lost $8000 in due diligence fees paid that the seller had spent during the pendency of the contract. The Commission noted that Mr. Pitzer had reimbursed the buyers for their due diligence fees and additional costs incurred.

SENSATIONAL REALTY INC (RALEIGH) – By Consent, the Commission suspended the firm license of Sensational Realty Inc. for a period of 12 months, effective June 10, 2022. The Commission then stayed the suspension in its entirety. The Commission found that Sensational Realty Inc. failed to properly account for trust money and comingled funds resulting in an apparent overage in its trust account.

JAMES COOPER SMITH (RALEIGH) – By Consent, the Commission suspended the broker license of James Cooper Smith for a period of 6 months, effective June 10, 2022. The Commission then stayed the suspension in its entirety. The Commission found that Mr. Smith purchased a residential property and received a home inspection report provided by the seller. Mr. Smith closed on the subject property and made substantial repairs to it over the next few months with various contractors. Mr. Smith listed his property with a licensed firm and failed to ensure that all of the repairs made to the subject property corrected all of the material issues discovered by the previous inspection report. The home inspection reports of future buyers discovered some of the same issues as noted on the prior inspection report. The Commission notes that Mr. Smith has since corrected these issues and the home has sold.

Allan R. Dameron Legal Internship Award 2022

At its June 22, 2022 meeting, the Commission awarded the Allan R. Dameron Legal Internship Award to Nicholas Bainbridge. This annual award is given in honor and memory of Allan Dameron who served on the Commission for nearly eight years beginning in 1999, including two terms as Chairman. Mr. Dameron was also a former Dean of the REALTOR Institute, and past president of the North Carolina Real Estate Education Foundation.

Each year, this award is given to a North Carolina law student who has demonstrated an interest in public service. Mr. Bainbridge is a rising second year law student at Elon University School of Law where he spent his first year working with the Innocence Project working on constructing appeals for defendants. Mr. Bainbridge also worked as an ESL tutor for adult learners and has interned with the Greensboro Police Department and Guilford County Schools. Mr. Bainbridge is a graduate of High Point University, where he received his Bachelor of Arts degree in Criminal Justice.

The July 20 Commission meeting will be in Durham!

Have you ever wanted to attend a Real Estate Commission meeting to see what happens? If so, please join us at the JB Duke Hotel, 230 Science Drive, Durham, NC in Ballroom AB. We will be welcoming the public in for coffee at 8:30 AM, with the Commission meeting starting at about 9:00. This is a great opportunity to meet the Commission Members and key staff. You are also welcome to stay for a portion or for all of the Commission’s meeting. Mark your calendars for July 20!

Employment Opportunities Available

Are you interested in joining the staff of the North Carolina Real Estate Commission? From time to time, employment opportunities become available. They are posted on the Commission’s website under the “About Us” tab.

Click here for more information.

Staff Appearances

Miriam Baer, ExecutiveDirector, spoke at the NC REALTORS® Mobile Monday meeting on June 6.

Steve Fussell, Chief Consumer Protection Officer, spoke at the Raleigh Association of REALTORS meeting on June 9.