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Diversity, Equity, and Inclusion Updates

As a part of the Commission’s ongoing effort to combat discriminatory behavior in real estate brokerage we are committed to evaluating the annual Update courses to include relevant topics and resources. To this end, the 2020-2021 General Update Course included substantial material on fair housing, and the 2021-2022 Update Course included substantial information on racial equity. This material can serve as a great resource and is available for reference on the Commission’s website.

Fake Seller / Fake Buyer Scam Alerts

By Tiffany Ross- Consumer Resource Officer & Bruce Rinne- Information Officer

The North Carolina Real Estate Commission has been receiving an increasing number of calls about fraudulent buyers and sellers attempting to scam innocent people, attorneys, and lenders out of due diligence fees, properties, or mortgage payoffs. These scam artists can be located anywhere in the world, yet claim they are local. Here are a few recent examples of calls we received, red flags to alert you to a potential scam, and potential action you can take to reduce risk.

FSBNO – For sale by NOT the owner

            A neighbor was driving by a parcel of land adjacent to their own and noticed a For Sale By Owner sign but did not recognize the phone number on the sign. Suspicious, the neighbor, who knew the property owner, called the owner with the phone number the neighbor already had and asked if they were selling. The owner said ‘No’ and called the police to take down the sign and investigate.

            Action you can take:

  1.  If your client is interested in an FSBO, while you may not be able to verify that the phone number on the sign is correct, you can look up the owner of record on the county tax website and/or register of deeds website. You can also ask the purported owner for photo identification to ensure it matches the public record.
  2. If the purported owner will not identify themself, or they get angry or rude with you for your due diligence efforts, this is a red flag that a scam may be in the making. You can report your concern to local law enforcement (Sheriff/Police), and advise your clients to beware, make further investigation, and/or move on.           

Fake Seller Contacting Listing Agents

A listing agent received a call from the purported owner of a vacant lot located in a new subdivision about listing their lot. The listing agent did their due diligence by pulling the deedto  verify that the names matched, and then sent the listing agreement for digital signatures. Once the signatures were received, the agent put their sign in the yard. As luck would have it, again a neighbor was suspicious. After calling the rightful owner, the listing agent learned that the property was not for sale. The rightful owner showed up, called the agent on the sign and had the sign removed 3 days after the listing was posted.. Later that day the property was relisted with another broker who put their sign in the yard. Again this second listing broker was alerted to the fraud and removed their sign. The property owners now look daily to see if the property is listed for sale either on the MLS or on various websites.

            Action you can take:

  1. If you are contacted by someone claiming to own land, take steps to verify the person you are communicating with matches the person on the deed. Ask for photo identification and get a copy for your records.  (See #1 and #2 above). 
  2. When listing a property, check the history and contact the previous listing agent/firm if something seems strange about the listing (short time on market, sudden withdrawal) to see if there may be fraud or material facts that need to be disclosed.
  3. If you encounter a property owner that has been a victim of multiple attempts to sell their property without their consent, encourage them to contact the following:
    1. FBI – to report the fraudulent activities and get assistance in stopping the perpetrator.  https://www.fbi.gov/how-we-can-help-you/safety-resources/scams-and-safety
    2. NC Attorney General – Fraud Hotline (877) 5NO-SCAM.  https://ncdoj.gov/

Fake Buyer Dodging Due Diligence Fee Payment

A homeowner receiving a job transfer listed their home for sale. The seller received a full price offer the first day with a quick closing. The seller contracted to sell the property and immediately contracted to purchase a home in their new town and submitted a Due Diligence fee equal to the amount of Due Diligence payment they were to receive from their home sale. The buyer made one excuse after another and the Due Diligence payment never came. The seller was told that the buyer was sorry and offered to raise the price $25,000 if the seller would wait until the closing to get the Due Diligence fee. When the seller went to the attorney’s office to sign the settlement documents, the seller learned that the buyer wasn’t real  and was trying to get the attorney to wire the proceeds of the sale to them. The seller was unable to purchase their new house, lost the Due Diligence fee they had paid, and was in serious danger of losing their job because they did not relocate. With the loss of the Due Diligence fee on the new home, the seller also was unable to make their next few mortgage payments.

            Action you can take:

  1. As a real estate broker, part of your job is to advise your client about their options to help protect them in their real estate transaction. While you cannot force a client to take your advice, recommend best practices for their protection, preferably in writing. A prudent real estate broker would recommend the seller-client ensure they have the due diligence funds in hand before spending additional money  on a new property.
  2. A prudent broker would be careful to ask for proof of funds, or prequalification information for the seller’s consideration prior to acceptance of an offer. If unable to verify, the broker should inform the seller and warn them of the possible outcomes if the buyer cannot perform.

Fake Seller Disappears After Receiving Due Diligence Fee

Someone claiming to own a property listed the property for sale and got multiple offers during the ‘Coming Soon’ period. A buyer went under contract and delivered a large Due Diligence fee that was wired to the seller’s account. The “seller” was never heard from again.

            Action you can take:

  1. Verify the seller/client’s identity as mentioned above. While it is the listing agent’s duty to take reasonable steps to verify the identity of their client, if a red flag arises as to an owner’s identity, buyer agents can help protect their buyer client by requesting proof of seller identification from the listing agent, and verifying the name(s) against public records.
  2. While brokers should not be involved in the transfer of funds, they should make every effort to educate clients on the dangers of wire fraud. 
  3. Be aware that there are specific, intentional, and targeted attacks against buyers and sellers happening more and more frequently. Educate your clients and explain why you are taking more precautions for their safety and protection as well as your own. If you suspect something may be amiss with either the buyer or seller, do more investigation. A broker may wish to verify the identity of their client or the other principal by making sure they have the proper ID to be able to close. Available tools for this include a Google search of their name and the address, researching the obituaries, contacting neighbors, and checking social media sites like Linked-In and Facebook.

Other Red Flags or statements to look out for:

1. The buyer/seller is traveling on vacation (sometimes abroad), claims they cannot meet in person, and has to do everything by email.

2. The seller has a family emergency, needs a quick cash sale, and will accept substantially less than full price if they can close in a very short time.

3. The email address or phone numbers are from another country. Of course, there are legitimate buyers and sellers who live overseas, but this does raise a flag that should be checked.

4. The photo IDs, such as drivers’ licenses or passports, are barely legible.

5. The Seller does not require a Due Diligence fee and/or low or no Earnest Money combined with a quick closing (in order to obtain quick proceeds before a scam is discovered).

6. The buyer/seller makes constant excuses, is not able to perform the terms of the contract, or is not returning paperwork.

7. The buyer/seller gets very angry at the broker as the transaction gets closer to closing and applies pressure on the broker to make sure the deal goes through. Sometimes they offer an incentive such as commission bonuses or promising other opportunities to buy or sell.

Remember to protect yourself and your client by asking questions and doing research when faced with red flags.

The January 2023 Commission Meeting will be in Wilmington!

The North Carolina Real Estate Commission is pleased to announce that it will be holding its January 18-19, 2023, business meeting and hearings in Wilmington, North Carolina. You are cordially invited to join the Commission members for coffee on Wednesday, January 18th at 8:30, before the meeting begins, and to stay or attend the meeting at any time throughout the day. The business meeting is expected to begin Wednesday at 9:00 and to last until mid-afternoon.

The meeting will be held at:

EMBASSY SUITES WILMINGTON RIVERFRONT – SALON I

9 ESTELL LEE PLACE, WILMINGTON

The Commission members welcome the opportunity to meet you and hear your thoughts. While not required, we will appreciate your RSVP by January 11th to exec@ncrec.gov for planning purposes.

Cybersecurity: Are you Secure?

Are you familiar with the type of cyberattacks used by hackers? Do you have cybersecurity policies and procedures?

The Cybersecurity and Infrastructure Security Agency (CISA) defines cybersecurity as the art of protecting networks, devices, and data from unauthorized access or criminal use and the practice of ensuring confidentiality and integrity, and availability of information.

Cybersecurity attacks are prevalent in brokerage transactions due to the nature of the business. There are various types of cybersecurity attacks; however, some of the most common cybersecurity attacks are:

Business Email Compromise

A Business Email Compromise scam in a real estate transaction may occur when the email account of an individual (e.g. broker, attorney, principal) in the transaction is hacked. After the email is compromised, the hacker monitors the communication to extract relevant details such as the property description and associated closing costs. Once they have this information, the hacker sends a spoofed email (e.g. an email similar to the original account holder) so that future electronic communication is diverted to the hacker. Business Email Compromises are usually used to get unauthorized funds, access personal, confidential information, and/or W-2 forms, according to the Internet Crime Compliant Center.

Cloud Storage Attacks

Cloud storage providers allow brokers and brokerage firms to secure their data, collaborate with others, and access information from a variety of locations. Due to the magnitude of information that is stored in the cloud, hackers may attack the cloud storage provider by retrieving the passwords of users or the security tokens of a computer.

Smishing

Brokers routinely communicate with many different people using their cell phones and tablets. Therefore, they are susceptible to smishing scams. Smishing is similar to phishing. Phishing is defined as a scam that is sent via email to individuals. Similarly, smishing involves hackers sending links or attachments via text to gain access to confidential information. Brokers should be careful when receiving text messages, links, or attachments from unknown sources.

The National Association of Realtors® has created a resource entitled, Cybersecurity Checklist: Best Practices for Real Estate Professionals, to assist brokers with developing cybersecurity policies. Brokers may want to use some of the following best practices referenced in the checklist to proactively prevent a cybersecurity attack such as:

The Cybersecurity Checklist: Best Practices for Real Estate Professionals article can be accessed here if you would like additional information. Also, the Commission published some information about Cybersecurity in the 2020-2021 Update Course. This content can be retrieved here.

If you have any further questions, please contact the Education & Licensing Division at 919.875.3700.

Current Stats: Monthly Licensee Count as of October 1, 2022

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.

We currently have available the following position:

Auditor – Audits and inspects real estate brokerage trust account records state-wide. Click here for more information.

Staff Appearances

Brian Heath, Consumer Protection Officer, spoke at the Albemarle Area Association of REALTORS meeting on October 12.

Janet Thoren, Director of Regulatory Affairs, and Len Elder, Director of Education & Licensing, spoke on The State of the Commission at the NC REALTORS Convention on October 17.

Len Elder, Director of Education & Licensing, Janet Thoren, Director of Regulatory Affairs, Michael Gray, Chief Auditor/Investigator, and Cindy Chandler, Commissioner, presented “Doobie Hemp Gets Audited” at the NC REALTORS Convention on October 18.

Brian Heath, Consumer Protection Officer, spoke at the High Country Association of REALTORS meeting on October 19.

Christy Evans, Consumer Protection Officer, spoke at the Realty Executives of Hickory.

The Commission Names Tiffany Ross as the First Consumer Resource Officer

The North Carolina Real Estate Commission is excited to welcome Tiffany Ross as the Commission’s first Consumer Resource Officer.

Ross holds a MS from Georgia Institute of Technology, and BS from Florida State University.  She brings to the Commission a wealth of experience in real estate education, brokerage, writing, and compliance. In addition to her education and compliance background, she has been a real estate licensee for over 17 years.

In her new role, Ross will focus on evaluating the Commission’s current consumer resource initiatives and recommending strategies that align with the Commission’s consumer education goals. She will also be responsible for raising awareness about current real estate related issues among licensees and the public, as well as creating resources and implementing initiatives to meet the Commission’s consumer education objectives across the real estate brokerage profession.

Assumed Business Name Filing Deadline Coming December 1, 2022

On December 1, 2017, the legislature repealed Chapter 66, Article 14 and enacted Article 14A, the “Assumed Business Names Act.” This change modernized the assumed business name process to make it easier to register, find, and maintain assumed name information. The new Act altered the requirements for the assumed business name certificate and created the means by which a single registration in the office of one Register of Deeds can be made effective for multiple counties.

Certificates filed before December 1, 2017 remained valid for a five-year transitional period during which individuals and entities with pre-existing assumed business names could re-file a certificate to preserve the effectiveness of the name designation.  That transitional period is ending and filers have until December 1, 2022 to re-file a certificate for a pre-existing assumed name. Remember also that filers of assumed business names must update the filings within 60 days of the information changing.

Compliant blank certificate forms are available from registers of deeds or may be downloaded from https://edpnc.com/start-or-grow-a-business/start-a-business/business-forms/.

For additional information about when, how and why to file an Assumed Business Name, go to: https://www.sosnc.gov/divisions/business_registration/assumed_business_names.

Working With Real Estate Agents Disclosure – Update

– By Stephen Fussell, Chief CPO

The Commission introduced the Working With Real Estate Agents Disclosure (“WWREAD”) in the spring of 2021 and its use became mandatory on July 1, 2021. Based upon consumer complaints investigated by this office, it appears that most agents are using the form properly. This article seeks to remind licensees regarding the key elements of the form.

The two primary purposes of the WWREAD are (1) to caution prospective buyers and sellers not to share confidential information with brokers who do not represent them and (2) to introduce prospective buyers and sellers to the types of agency relationships that are offered by the firm of the broker who is reviewing the WWREAD with them.

Commission Rule A .0104(c) requires licensees to review the WWREAD with prospective buyers and sellers at first substantial contact. Simply sending the form to a prospective buyer or seller and asking them to sign it or even to call you if they have questions does not comply with this rule. Including a link to the form in your email signature is not sufficient to comply with the rule. A broker must review the WWREAD with the prospective buyer or seller.

What is first substantial contact? First substantial contact occurs either (1) at the point that a prospective buyer or seller begins to volunteer confidential information regarding their interest in a sales transaction or (2) when a broker wants to ask a question to obtain confidential information regarding the buyer’s or seller’s interest in a sales transaction. In order to prevent a prospective buyer or seller from revealing confidential information before a broker reviews the WWREAD with them, every broker should develop an introductory statement for a first interaction, such as “Before you share any information that you do not want me to share with others, we need to review an agency disclosure together.”

Both sides of the WWREAD contain an instruction that reads, “Note to Agent: Check all relationship types below that may apply to this seller [or buyer].” A broker should mark each type of agency offered by his or her firm. Marking a type of agency does not mean that a buyer or seller is choosing that type of agency. It simply means that the firm offers that type of agency relationship.  For example, if a broker’s firm only represents either sellers or buyers, but not both, then the broker should only mark one section of the WWREAD – the “Seller’s Agency” section or the “Buyer Agency” section, depending on which the firm represents.   If a broker’s firm represents both sellers and buyers, and offers dual agency, then the broker should mark the first two types of agency on the form. If a broker’s firm offers designated dual agency, then the broker should mark the first three types of agency on the form. If a prospective buyer or seller refuses agency representation, a broker should still review the types of agency offered by the firm and mark the unrepresented buyer/seller type in addition to the other types of agency relationships offered.

After reviewing the WWREAD with a prospective buyer or seller, a broker should ask them to sign the form. Signing the form only demonstrates that they have received the form. It does not create an agency relationship. If a buyer or seller refuses to sign the form, give them a copy of it and make a note in your own records that the buyer or seller refused to sign. Keep in mind that, if the Commission performs a spot audit and finds a significant number of unsigned WWREADs, it may demonstrate a lack of compliance with Rule A .0104(c). Moreover, rule violations can lead to disciplinary action.

After reviewing the WWREAD with a prospective buyer or seller, be sure to ask them if they have any questions. It is important that they have a basic understanding of the types of agency relationships offered by your firm. You can also offer them the Commission’s brochure, “Questions and Answers on: Working With Real Estate Agents.” This publication will answer common questions that arise regarding agency relationships.

In order to assist brokers in reviewing the WWREAD with prospective buyers and sellers, the Commission now has two videos in the “Video Library” section of its website (ncrec.gov) under the “Resources” tab and the “Consumers” tab.