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Reminder: Working with Real Estate Agents Disclosure

Commission Rule 58A. 0104(c) states: In every real estate sales transaction, a broker shall, at first substantial contact with a prospective buyer or seller, provide the buyer or seller with a copy of the publication “Working With Real Estate Agents” …(WWREA).

In 2021, the NCREC revised the WWREA Disclosure to be one page, double-sided, with one side for sellers and one side for buyers. The new WWREA Disclosure was designed to be quicker and simpler for brokers to use and easier for buyers and sellers to understand. Additionally, the original brochure was updated and expanded to be available for use in conjunction with the required WWREA Disclosure. The WWREA Disclosure and brochure explain the various types of agency relationships in a clear concise manner, educating the consumer and defining expectations.  The WWREA Disclosure is a broker’s opportunity to discuss and clarify what their agency role may be in the transaction and to start the conversation concerning the contemplated agency status, payment, and future options.

Buyer Agency Agreements

Commission Rule 58A .0104(a) has long required brokers to enter into written agency agreements. Listing agreements must be in writing and signed by the broker and client at the time their agency relationship is formed. Buyer agency agreements must be in writing and signed by the broker and client no later than the time of making an offer. Note that the rule does not prohibit a broker from entering into a written buyer agency agreement earlier than the time of offer submission. Accordingly, the proposed rule change for REALTORS® does not conflict with the Commission’s rule.

Additionally, NCGS § 93A-13 prohibits a broker from filing suit for recovery of brokerage compensation unless the agreement is in writing. Therefore, brokers need to be in compliance with NCREC rules in order to avoid disciplinary action and in order to recover a commission through the civil court if the client fails to pay.

The Commission does not have jurisdiction regarding the setting or advertising of commissions. Commission Rule 58A .0109(f) specifically notes that the NCREC will not act as a board of arbitration and shall not compel parties to settle disputes concerning such matters as the rate of commissions, the division of commissions, pay of brokers, and similar matters. The NCREC reminds all of its licensees that brokerage commissions remain a negotiable term between the broker/firm and client.

Finally, it is important to remember that Commission Rule 58A .0112(b)(1) bars a broker from using a preprinted offer or sales contract form containing any provision concerning the payment of a commission or compensation to a broker or firm. While a client may consider the amount of commission when considering making or accepting an offer, the broker/firm should not be made a third party in a form purchase contract between the buyer and seller. The current standard form residential contract includes a provision allowing the seller to pay an agreed amount toward any of buyer’s expenses.

The NCREC understands that the real estate industry is always evolving, and our role is to ensure whenever possible that these changes benefit consumers and to assist NC brokers in understanding their duties. The NCREC remains dedicated to fostering a market that prioritizes consumer interests, fair competition, and transparency. We also remain available to answer questions about the application of the License Law and Commission rules to help brokers and consumers better navigate their transactions.

Simplified Continuing Education to Increase Professional Competence

This article was printed in the February, March, and April eBulletin’s.

Pursuant to Rule 58A. 1702, North Carolina brokers must complete eight credit hours of real estate continuing education each license year. The eight hours consist of:

All brokers without BIC-Eligible status and provisional brokers must attend the General Update Course and all Brokers-in Charge and BIC Eligible Brokers must attend the Broker-in-Charge Update Course. A broker is required to complete eight credit hours of continuing education by June 10th at 11:59 PM EST. This requirement begins upon the second renewal following initial licensure and upon each subsequent annual renewal.

In the past, Rule 58A .1708 permitted brokers to request equivalent credit for a course that was not approved by the North Carolina Real Estate Commission by submitting a $50 fee, course outline and completion certificate. On July 1, 2023, the availability of equivalent credit was removed for all brokers, except an instructor who either authored or taught a course. Therefore, there is no equivalent credit offered for a course that is not currently approved by NCREC.  A broker who previously submitted courses for equivalent continuing education credit should take the required Update course and an approved North Carolina elective prior to the June 10th deadline.

Rule 58A .1708 was changed to ensure that all North Carolina brokers are required to take North Carolina approved courses. The change also eliminates the need for brokers to pay additional fees, especially when courses were not approved for equivalent credit.

Rule 58A .1711 previously exempted brokers who were licensed in another state from the continuing education requirements in North Carolina. On July 1, 2023, the Commission repealed that rule. All brokers licensed in North Carolina must meet the same eight hour continuing education requirement. The prevalence of online courses means that this is no longer an unreasonable burden for licensees living outside North Carolina.

These rule changes were intended to make things simpler for brokers and to assure that all brokers in North Carolina obtain the same education regarding North Carolina rules, statutes and information to ensure the competence of brokers practicing in the state. If you have questions about the status of your continuing education, you can login and check your continuing education record on the Commission’s website.

That is just NOT true!

You do not have to complete your annual CE course requirements before you renew your NC broker license. The annual 45-day license renewal period begins on May 15, 2024, and ends on June 30, 2024, at 11:59PM EST. Individual broker and firm licenses can easily be renewed online by confirming some information and paying the renewal fee EVEN if continuing education has not yet been completed. Don’t delay in your renewal! And…do take your CE by June 10th if you wish for your renewed license to be on active status.

Reminder: Your Email Address is Important!

Did you know that the Commission uses electronic communication to correspond with licensees? Is the correct email address listed in your license record?

Pursuant to Rule 58A .0103(a),

Upon initial licensure, every broker shall notify the Commission of the broker’s current personal name…and email address.

Subsection (b) of Rule 58A .0103 specifies:

Every broker shall notify the Commission in writing of each change of personal name…and email address within 10 days of said change.

Brokers must ensure that the Commission always has the correct email address in their license record. A current email address is imperative because the Commission sends the following correspondence electronically:

Brokers may log-in to their license record at any time to update their information to adhere to Rule 58A .0103.

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.

RESOURCES:

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

Current Stats: Monthly Licensee Count as of April 1, 2024

Staff Appearances

Minerva Mims, Diversity, Equity, and Inclusion Officer, spoke at the NC REALTORS® on April 1.

Miriam Baer, Executive Director, spoke at the Albemarle Area Association of REALTORS® AAAR General Membership meeting on April 9.

Brian Heath, Consumer Protection Officer, spoke at Brunswick County Association of REALTORS® on April 11.

Minerva Mims, Diversity, Equity, and Inclusion Officer, spoke at the City of Gastonia on April 11.

Charlie Moody, Deputy Legal Counsel, spoke at Premier Sotheby’s International Realty on April 11.

Steve Fussell, Chief Consumer Protection Officer, spoke at United Real Estate Queen City on April 24.

Bruce Rinne, Information Officer, spoke at Meredith Christy Real Estate on April 24.

Tech Corner: How to Make a PowerPoint using AI

Video Link: https://share.synthesia.io/5f135c3a-2cc3-44d3-92d6-6e2c0314ad71

Disciplinary Actions

JAMES RAY HALL JR (FAYETTEVILLE) – By Consent, the Commission suspended the broker license of Hall for a period of 12 months, effective February 1, 2024. The Commission then stayed the suspension in its entirety upon certain conditions. The Commission found that Hall, acting as a co-listing agent, paid for renovations and additions to a listed property and advertised it as connected to city sewer.  Following closing, the buyer learned that the property was not connected to city sewer. Hall failed to verify that a permit was obtained for the renovations and additions to the property and failed to disclose the lack of permits to the buyer.

WILLIAM M. LITTLE (FAYETTEVILLE) – By Consent, the Commission suspended the broker license of Little for a period of 12 months, effective February 1, 2024. The Commission then stayed the suspension in its entirety upon certain conditions. The Commission found that Little, acting as broker-in-charge, failed to maintain required property management records, had an overage in the security deposit account, and failed to timely provide documentation upon request by the Commission.

LITTLE & YOUNG, INC. (FAYETTEVILLE) – By Consent, the Commission suspended the firm license for a period of 12 months, effective February 1, 2024. The Commission then stayed the suspension in its entirety upon certain conditions. The Commission found that the firm failed to maintain proper property management records, had an overage in the security deposit account, and failed to timely provide documentation regarding HOA management upon request by the Commission.

BRYCE HOWARD SMITH (CHARLOTTE) – By Consent, the Commission suspended the broker license of Smith for a period of 2 months, effective March 1, 2024. The Commission found that Smith, acting as Qualifying Broker of Charlotte Homes & Rentals, LLC, allowed the continuation of brokerage services from July 1, 2022 to May 2, 2023, without an active and designated Broker-in-Charge.

CHARLOTTE HOMES & RENTALS LLC (CHARLOTTE) – By Consent, the Commission suspended the firm license for a period of 5 years, effective March 1, 2024. The Commission found that the firm continued to operate and conduct brokerage services throughout a 10-month period from July 1, 2022 to May 2, 2023, without an active broker-in-charge.

STEVEN ROBERT SPENCER (WAKE FOREST) – By Consent, the Commission suspended the broker license of Spencer for a period of 24 months, effective March 1, 2024. The Commission then stayed the suspension in its entirety upon certain conditions. The Commission found that Spencer, acting as broker-in-charge, failed to respond to Letters of Inquiry in a timely manner and failed to adequately ensure proper advertising. Spencer oversaw a transaction in which the property was advertised as containing 3 bedrooms despite the septic permit only allowing for 2 bedrooms.

MOISES C. MIRANDA (GASTONIA) – By consent, the Commission suspended the broker license of Miranda for a period of 12 months, effective March 15, 2024. The Commission then stayed the suspension in its entirety upon certain conditions. The Commission found that Miranda listed a home that went under contract and the home inspection uncovered various issues. Following the termination of that transaction, Miranda relisted the property but failed to disclose the material facts learned during the first transaction.

MARGARET A. SOPHIE (CARY) – By Consent, the Commission reprimanded Sophie, effective March 20, 2024. The Commission found that Sophie failed to inquire further about certain disclosures by her seller-client on the RPOADS form, leading to her failure to discover and disclose material facts about the road maintenance of the subject property. Consequently, the buyer discovered after closing that they have responsibility for repairs, a fact that was well-known by all owners on the road, including the seller.

TRAVIS REYNOLDS HUDSON (RALEIGH) – By Consent, the Commission reprimanded Hudson, effective March 20, 2024. The Commission found that Hudson, acting as buyer’s agent, failed to advise his buyer-client on the relevance of certain responses on an  RPOADS private street disclosure question and otherwise failed to discover and disclose the buyer’s responsibility for road maintenance of the subject property prior to closing.

AUTUMNE VAUGHAN BENNETT (CARY) – By Consent, the Commission reprimanded Bennett, effective March 20, 2024. The Commission found that Bennett, acting as broker-in-charge for a listing agent, failed to adequately supervise her broker-affiliate regarding material fact disclosure of road maintenance responsibilities of the subject property. Consequently, the listing agent failed to discover and disclose material information related to a seller-client’s responses on the RPOADS form and the buyer discovered after closing that they are responsible for repairs, a fact that was well-known by all owners on the road, including the seller.

CLIO MADELEINE CARROLL (ABERDEEN) – By Consent, the Commission suspended the broker license of Carroll for a period of 6 months, effective March 20, 2024. The Commission then stayed the suspension in its entirety upon certain conditions. The Commission found that Carroll was the listing agent for a transaction in which a buyer’s agent submitted an offer on behalf of their buyer-clients that included an escalation clause. Carroll communicated to the buyer’s agent that another offer had been received and delivered a copy of the other offer to the buyer’s agent without first receiving permission from the other buyer. Carroll acknowledged her failure to obtain permission before disclosing the other offer.

MARK EZIO CARLTON (WILMINGTON) – By Consent, the Commission suspended the broker license of Carlton for a period of 12 months, effective March 15, 2024. The Commission then stayed the suspension in its entirety and placed Carlton on probation through March 15, 2025, upon certain conditions. The Commission found that Carlton failed to notice and disclose to his buyer client that there was a discrepancy in which a septic system was noted on the RPOADS form but the property was advertised as having city sewer in the MLS. The discrepancy was later discovered by a broker affiliated with Carlton’s firm who advised the buyer to have a septic inspection completed prior to completion of the closing. Carlton paid for the inspection, after which the buyer closed the transaction.

TRITORI REALTY GROUP INC. (RALEIGH) – By Consent, the Tritori Realty Group voluntarily surrendered its firm license with no right to reapply for a period of two (2) years, effective March 13, 2024. Tritori Realty Group Inc. neither admitted nor denied misconduct.

SCOTT O. MCDONALD (WEAVERVILLE) – By Consent, McDonald voluntarily surrendered his broker license with no right to reapply for a period of two (2) years, effective March 13, 2024. McDonald neither admitted nor denied misconduct.