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Jeff Malarney, Elected Chair, Sandra O’Connor, Vice Chair
Executive Director Miriam Baer announced that Jeffery J. Malarney of Manteo has been elected as Chair, and Sandra L. O’Connor of Greensboro, as Vice Chair of the North Carolina Real Estate Commission. Their terms will begin August 1, 2019.
Malarney, a former member of the Real Estate Commission, was reappointed to the Commission in 2018 by Governor Roy Cooper. He has practiced law in the Outer Banks for over 27 years and is a principal of the Law Offices of Jeff Malarney, PLLC. He is also a licensed real estate broker and property insurance agent.
A Commander (ret.) of the United States Navy Judge Advocate Corps, he is a former Special Assistant United States Attorney, past president of the North Carolina Vacation Rental Manager’s Association, and past chairman of the Outer Banks Chamber of Commerce.
Malarney founded and operated a mortgage brokerage company, an insurance agency, and created H20BX Waterpark in Currituck, North Carolina.
Malarney holds a JD from Wake Forest University School of Law and BA (cum laude) in Economics and Management from Albion College.
Sandra O’Oconner was appointed to the Commission by Governor Roy Cooper in 2017.
A broker with the Greensboro Allen Tate office, O’Connor has been a licensed North Carolina real estate broker since 1983. From 1985 to 2005, she was the owner and sole proprietor of Sandra O’Connor & Associates.
O’Connor has been active with the national, state, and local REALTOR® organizations and in community affairs.
She is a Past Director of the National Association of REALTORS® and a past Region 4 Vice President. A past President of the North Carolina Association of REALTORS®, as well as a Region V Vice President and Treasurer, she received its REALTOR® of the Year award in 2014. She is a past President and REALTOR® of the Year of the Greensboro Regional REALTORS® Association and has been admitted to its Hall of Fame.
O’Connor is a past chair and member of the Greensboro Planning Board and a past member of the board of directors of the Guilford Green Foundation. She holds a BA degree from Carlow University in Pittsburgh and a Masters of Librarianship from the University of Washington in Seattle.
You have questions? We have answers!
Check out the Commission’s new Support page that provides answers to licensees’ and consumers’ most common questions. To access the Support page, go to…
- www.ncrec.gov;
- click on the Support menu or the Contact Us link.
Click here for more information OR call the Education and Licensing Division at 919.875.3700.
Deadline for Completion of Postlicensing Education is Changing
Currently, Commission Rule 58A .1902 requires a Provisional Broker to complete at least one of the 30-hour Postlicensing courses during each of the first three years following the date of their initial licensure in order to maintain active license status. This rule will remain in effect as-is until June 30, 2020.
Beginning July 1, 2020, Rule 58A .1902 will require a Provisional Broker to complete all three 30-hour Postlicensing courses within 18 months of initial licensure in order to maintain active license status.
A Provisional Broker’s license will be placed on inactive status if the Provisional Broker fails to timely complete Postlicensing courses.
More information about this important change is provided during General Update (GENUP) and BICUP courses throughout the year. Also, if you are a provisional broker, be on the lookout for email communications from the Commission about the changing education deadlines.
If you have further questions regarding this rule change, please contact the Education and Licensing Division at 919.875.3700.
Unclaimed Property: NC Law Requires Annual Records Review and Reporting
By Madison L. Mackenzie, Associate Legal Counsel I
Do you have “dormant” funds sitting in your trust or escrow account? Maybe a tenant failed to provide a forwarding address for you to return his or her tenant security deposit or maybe you received an earnest money deposit from a buyer who was never heard from again. If those funds are still sitting in your trust account after time has passed, it could pose a problem.
All businesses operating in North Carolina are subject to the State’s Unclaimed Property laws, codified in Chapter 116B, Article 4 of the North Carolina General Statutes.
These laws require all businesses to review their accounting records annually and determine whether they are in possession of any dormant unclaimed property. If they are, the business is required to file a report with the Unclaimed Property Division of the N.C. Department of State Treasurer and remit the unclaimed property. Failure to file this report and properly remit unclaimed property can result in interest charges, a $1,000 civil penalty for each day of delinquency, and a penalty equal to 25% of the value of the unreported property.
Any real estate firm with a trust account holding money on behalf of others is a potential holder of unclaimed property and is therefore subject to these laws. The N.C. Department of State Treasurer has outlined four steps to identify unclaimed property and properly report it.
1. Identify Property that Should be Reported
Property is unclaimed if the apparent owner has not communicated with the holder of the funds or indicated an interest in the property within a period of time known as the “dormancy period.” The dormancy period varies depending on the type of property being held. In most cases, the dormancy period for funds in an agent’s trust account is five years. However, disputed funds are not unclaimed property and should never be remitted to the State Treasurer.
For most holders, November 1st is the due date to report all unclaimed property that has reached its dormancy holding period as of the prior June 30th. The State Treasurer provides conversion tables on its website to assist with determining when reporting is due.
2. Attempt to Locate the Owners
Prior to reporting unclaimed property that has reached its dormancy holding period, the agent must make an attempt to contact the apparent owner in writing when the property being held exceeds $50. The State Treasurer refers to this written notice as a “due diligence letter,” not to be confused with the due diligence associated with real estate transactions. This notice to the apparent owner must be mailed not more than 120 days or less than 60 days from the reporting due date.
If the agent is unsuccessful in identifying the apparent owner of the funds, the agent should contact the State Treasurer for further assistance. The property will still need to be reported and remitted, even if the apparent owner is unknown.
3. Prepare your Report
The report(s) required will depend on the type of unclaimed property being reported. Most likely, the agent will be reporting unclaimed “cash”; and therefore, will need to complete the Unclaimed Property Verification Report (ASD-159) and Form ASD-21.
The agent should be prepared to provide names, last known addresses, social security or tax identification numbers, dates of birth, driver license numbers, and email addresses of the apparent owners, if known by the agent. Any other information that may be available to help in identifying the owner should be reported with each property.
4. Submit your Report and Remit Funds Due
If the agent is reporting less than 50 property owner records, the report can be filed electronically or in paper form. If more than 50 properties, the report must be filed electronically. Remitting unclaimed funds can be done by check or ACH or Wire Transfer.
For reports filed after July 16, 2012, the records accompanying the report must be retained for 5 years from the date the report is filed. (Note: record retention for reports filed before July 16, 2012 remains at 10 years.)
No report is required if there is no unclaimed property identified in the agent’s financial review. Additionally, filing extensions may be granted for good cause.
For further information, The North Carolina Holder Reporting Guide produced by the N.C. Department of State Treasurer can be found at https://www.nctreasurer.com/upp/Resources/NC_Holder_Reporting_Guide.pdf.
What you can do to Prevent Unclaimed Property? Keeping proper and current trust accounting records will keep you from later discovering a trove of unclaimed property. Ensure that accounts are reconciled timely and resolve all exceptions, review uncashed checks in ledger accounts, and review unusual journal entries.
The real estate firm is relieved of liability once they have remitted dormant unclaimed property to the State. If the apparent owner later wishes to claim the property, they must direct that claim to the State. Also, the real estate firm avoids fines and penalties by properly and timely reporting unclaimed property.
Unclaimed property laws also apply to accounts other than trust or escrow accounts. To learn more about your responsibilities as a real estate agent or firm when it comes to unclaimed property, contact the North Carolina Unclaimed Property compliance staff at unclaimed.property@nctreasurer.com or by calling 919-814-4200.
To stay up-to-date on new laws and legislation that affect your responsibilities as an unclaimed property holder, sign up for Holder Reporting e-Updates provided by the N.C. Department of State Treasurer at https://2ec804.campgn5.com/UP-Business-Holders.
My license expired. How do I reinstate it?
To maintain a current license, brokers must renew their license annually between May 15 and June 30. The license of a broker who fails to renew during that period will expire on June 30, and that broker must cease all brokerage activities immediately.
What steps must a broker take to reinstate an expired license? That answer depends on how long the license has been expired.
To reinstate a license expired for less than 6 months:
- go to the Commission’s homepage (www.ncrec.gov);
- click on Reinstate your License;
- enter your license number and PIN (last 4 of your SSN unless you have changed it);
- answer required questions; and
- pay $90 reinstatement fee.
NOTE: To regain active status, a License Activation / Affiliation form (REC 2.08) also must be submitted.
To reinstate a license expired for 6 months but no more than 2 years:
- Successfully complete one 30-hour Postlicensing course (course must be completed within 6 months prior to submitting reinstatement application); and
- Submit a reinstatement application with $90 application fee and all required documentation, including criminal background report;
-OR-
- Submit a reinstatement application with $90 application fee and all required documentation, including criminal background report; and
- Pass National and State sections of license exam.
NOTE: To regain active status, a License Activation / Affiliation form (REC 2.08) also must be submitted.
To reinstate a license expired for more than 2 years:
- Successfully complete the 75-hour NC Broker Prelicensing course;
- Submit a license application with $100 original application fee and all required documentation, including criminal background report; and
- Pass National and State sections of license exam.
NOTE: You will be licensed as a provisional broker and be subject to the 90-hour Postlicensing education program. To gain active status, a License Activation / Affiliation form (REC 2.08) also must be submitted.
For more information, review Commission Rule 58A .0505 or visit the “Reinstate your License” page on the Commission’s website. You may also contact the Commission’s Education & Licensing Division for specific instructions.
Avoid Vaguely Written DDRA’s
By Sheryl B. Graham, Consumer Protection Officer
What are the consequences of a vaguely written DDRA?
One of the most important issues addressed during the due diligence period of a real estate transaction is the condition of the property. Brokers should address their client’s concerns and expectations when it comes to the requested repairs and adjustments.
Several recent cases reviewed by the Commission’s Regulatory Division staff have involved complaints filed against brokers by buyer clients after closing. These cases have centered on poorly prepared Due Diligence Request and Agreement documents, Form 310-T, which often result in the expectations of the clients not being met. While this specific form is provided by NCREALTORS® for use by its membership, the same issues can arise in repair negotiations in due diligence contracts which do not use this form.
The details of the following case study are based on an actual complaint. A real estate broker assisted a buyer client with the purchase of a home. During the due diligence period, the buyer had a home inspection performed by a certified home inspector as suggested by the broker. The inspection revealed several items of concern with the property and the report noted, among other things, the following issues:
Item 2.4 Rotted wood at the base of the left porch column should be evaluated and repaired as necessary. Item 5.5 The crawl space shows widespread high moisture and fungal growth. Consult a professional foundation moisture control contractor to determine solution. Item 5.6 Moisture damaged sub-floor under master bath, evidence of water intrusion. Item 5.7 Vapor barrier should be installed in crawl space. Item 6.2 Kitchen sink spray option not working. Have repaired or replaced. Item 6.7 Hall bath shower head leaking. Have repaired or replaced.
The buyer’s agent prepared the Due Diligence Request & Agreement (DDRA) for the buyer client and it read as follows: “The buyers are requesting that the sellers repair the following items from the Home Inspection Summary, Items 2.4, 5.5, 5.6, 5.7, 6.2, and 6.7.” The buyer agent emailed the DDRA to the listing agent with the home inspection summary attached and the sellers agreed to the DDRA as written.
The buyers were comfortable to proceed with the sale and expected a professional moisture control contractor would evaluate and correct the crawl space issues. The sellers agreed to the repairs but it was their intention to hire a plumber for some of the items and do some of the work themselves.
As in many cases, the vaguely written DDRA led to a misunderstanding that was revealed right before closing! The day of the walk-through, the buyer agent asked for repair receipts and discovered that the crawl space repairs were not done by a professional moisture control contractor, but by the seller’s brother, a plumber. To repair the crawl space issues, the plumber had checked for leaks and finding none, installed a new vapor barrier and sprayed the visible fungus with a household cleaner. The remedy in no way met the expectations of the buyer. Not being able to delay closing because their household goods were outside on a moving van, the buyers felt they had no choice but to proceed with settlement. Ultimately, the buyer’s fears were realized when they found the moisture issues in the crawl space were not effectively repaired .
The language in the DDRA was vague and did not clearly define what exactly was being requested, how the requested repairs were to be completed, or who was to complete the repairs. The home inspection report outlined the issues but did not address how to specifically remedy them. Neither the buyer’s expectations nor the sellers were clearly defined, explained or fulfilled. In this case, like many others, the agreed upon repairs were left open to interpretation by the buyers and the sellers.
A poorly written DDRA that does not specifically address the issues, the remedies, the methods of repair and other important details, has the potential to adversely affect more than just the buyer of the property. The sellers and the brokers can also be adversely affected. Brokers should take great care to discuss and discern the expectations of the client, advise the client to seek additional professional opinions when necessary, and clearly articulate the client’s requests.
Possible violation of the Real Estate License Law in this case study include violations of N.C.G.S. § 93A-6 (a)(8) for being unworthy or incompetent to act in a manner which protects the public.
Things to keep in mind when preparing and negotiating the Due Diligence Request & Agreement
- What are the client’s expectations? What are the client’s concerns?
- Discuss all inspection findings and repair requests with the clients. Communication is key.
- The DDRA form reads … the Buyer requests and the Seller agrees…. The decision is the client’s.
- The language on the DDRA needs to be clear and specific: consider who will perform repairs, what will be repaired, and how the work should be done. Reference to an item number from an inspection report is not enough.
- A broker may want to advise the client to seek additional input from a repair professional.
- Avoid terminology that may not be clearly understood. Leave no room for interpretation. Seek legal counsel if needed.
- Any changes made to the DDRA need to be initialed by all parties to the transaction
- Seller agents should confirm that the sellers know specifically what they are expected to do and when.
- Buyer agents should recommend that the buyer client have a re-inspection if desired.
- Ratification of the DDRA does not end the Due Diligence period or amend the details of the contract.
- Use properly prepared documentation to amend the contract for money in lieu of repairs or to make changes to the Due Diligence period.
- Confirm that both parties have signed the agreement and there are no edits creating a counter-offer.
Subscribe now to the Commission’s new digital Real Estate Manual
The NC Real Estate Commission now offers its Real Estate Manual in an interactive and user-friendly web-based format.
Features of the new publication include: comic strips that display brokerage activities and examples of agency relationships between brokers and clients, self-check assessments, informative graphics, keyword searches, quick access to Postlicensing course content, and a database of sample contract forms.
The web-based Real Estate Manual will be offered for a subscription fee of $25.00 per license year.
CLICK HERE to subscribe to the new web-based Real Estate Manual.
Spotlight: Leonard H. “Tony” Craver, Jr., Commission Member
Leonard H. “Tony” Craver, Jr. has served on the North Carolina Real Estate Commission since October 2013.
The owner and BIC of Craver Real Estate, LLC, in Durham, NC, Tony has been practicing real estate since 1967.
Tony served as the President of the Durham Regional Association of REALTORS® in 2005 and received the Association’s REALTOR® of the Year award in 2007. Also, he served on the North Carolina Association of REALTORS® Forms Committee for 12 years and was its Chair in 2008-2009.
Tony was elected NCAR Region Four Vice President in 2011 and 2012, and he received NCAR’s Regional Service Award in 2012.
The National Association of REALTORS® awarded Tony “REALTOR® Emeritus” status in 2008.
Tony has authored a collection of stories about building a real estate business entitled From the Ground Up- Building and Selling the American Dream.
Tony graduated from Duke University with a BA in Economics and received a varsity letter in tennis. He is married and has four children and 10 grandchildren.
Reminder: Download your Digital Pocketcard
Now that you have renewed your license, you may download your new digital Pocketcard. To do so…
- Go to www.ncrec.gov.
- Click on Licensing.
- Click on Licensee Login.
- Enter your license number and PIN (last four digits of your SSN unless you have changed it).
- Click on View/Download Digital Pocketcard.
- Click on Digital PC. (Your Pocketcard will download to your device.)
If you prefer to have a printed copy of your Pocketcard, follow steps 1-5 above and then select “Print PC.”
Click here to access your license record.
