Case Study: Agency

FACTS: A broker had been managing a vacation rental property in the mountains for a client for several months. 

The client decided to sell the vacation property and asked the broker to assist.  The broker traditionally works only in property management but had prior experience in sales.  The broker felt that since they knew the property intimately, they would represent the seller’s property better than another broker.

The broker discussed agency, terms, pricing, marketing, and other aspects of the property with the seller-client.  The seller-client signed the Working with Real Estate Agents Disclosure (WWREA) form and completed the Residential Property and Owner’s Association Disclosure (RPOADS).  The broker then advertised the property on their website as being for sale.

After receiving a couple of offers on the property, the seller wished to accept a lower offer because it was a cash offer with a quick closing date. The seller asked their broker to provide an estimated net to seller with the proposed terms.  In this estimate, the broker charged a 5.5% commission.  The seller questioned this charge as they understood the commission would be 4.5% because of the property management relationship with the broker.

The broker was unable to produce a signed listing agreement.

ISSUE: Did the broker comply with 21 NCAC 58A .0104(a)?

ANALYSIS:  No. Commission Rule 58A .0104(a) requires that every agreement for broker services between a broker and an owner of the subject property be in writing and signed by the parties at the time of its formation.  In this scenario, the broker listed the property for sale on their website without a written and signed agreement. 

The North Carolina Real Estate Commission has long made clear the implications regarding listings. No broker may undertake to provide any brokerage services to a seller without a written listing agreement. A broker who engages in advertising, holding open houses, or acting on behalf of a seller in the absence of a written express agreement with the owner of the property operates in violation of Rule 58A .0104.

In addition, to violating Commission Rule 58A .0104(a), the broker potentially violated N.C.G.S. § 93A-6(a)(8):

“Being unworthy or incompetent to act as a real estate broker in a manner as to endanger the interest of the public.” 

The Commission determines whether or not a broker acted competently by analyzing documents and reviewing written correspondence. The Commission uses the Reasonableness Standard to evaluate a broker’s expected competency. A broker must exercise that degree of skill, care, and diligence that a reasonably prudent real estate broker would exercise under similar circumstances.

In this scenario, the broker acted outside of their normal expertise and failed to adhere to Commission Rule 58. 0104(a) by not having a signed agreement before listing the property. The broker did not act like a reasonably prudent broker because they failed to provide the necessary skill, care, and diligence their client required.

N.C.G.S. § 93A-6(a)(15) states that the Commission has power to suspend or revoke at any time a license issued under the provisions of this Chapter, or to reprimand or censure any licensee, if following a hearing, the Commission adjudges the licensee to be guilty of violating any rule adopted by the Commission.

As a result of the broker advertising the property without a listing agreement pursuant to Rule 58A .0104 and the broker’s failure to adhere to N.C.G.S. § 93A-6(a)(15), the broker may be subject to disciplinary action by the Commission.


N.C.G.S. § 93A-6(a)(15), 93A-6(a)(8), and 93A-6(a)(10)

License Law and Commission Rules: Rule 58A .0104

Articles: Getting Agency Representation Right…

Competence Of Licensees – NCREC