Disciplinary Actions

BLUE RIDGE VACATION CABINS, INC. (Blowing Rock) – The Commission accepted the permanent voluntary surrender of the firm license of Blue Ridge Vacation Cabins effective January 2, 2019. The Commission dismissed without prejudice allegations that Blue Ridge Vacation Cabins violated provisions of the Real Estate License Law and Commission rules. Blue Ridge Vacation Cabins neither admitted nor denied misconduct.

PATRICIA ANN BOULIA (Newport) – The Commission accepted the permanent voluntary surrender of the broker license of Ms. Boulia effective December 12, 2018. The Commission dismissed without prejudice allegations that Ms. Boulia violated provisions of the Real Estate License Law and Commission rules. Ms. Boulia neither admitted nor denied misconduct.

BENJAMIN MILLAR BURY (Huntersville) – By Consent, the Commission reprimanded Mr. Bury effective February 1, 2019. The Commission found that Mr. Bury, under the supervision of his broker-in-charge, was the listing agent for a commercial property on which a residential house was located with the owner residing there at the time of listing. The owner told Mr. Bury that the property was served by city water and city sewer. Without independently verifying city sewer service, Mr. Bury advertised the property in the MLS as being connected to the city sewer. After closing, the buyer discovered a septic tank on the premises and was informed by the city that the property was connected to city water but not city sewer.

DEBORAH RAY DERRICK (Kannapolis) – By Consent, the Commission reprimanded Ms. Derrick effective December 14, 2018. The Commission found that Ms. Derrick represented the buyer of a property listed as a three-bedroom home serviced by a septic system. Ms. Derrick, knowing that her buyer client intended to renovate the property and add a bedroom, failed to pull the septic permit or request a copy from the listing agent and failed to instruct her client to verify with local officials that his intended purposes for the property could be accommodated. Ms. Derrick was advised by the listing agent that one of the owners said the property can accommodate five bedrooms, but to verify this information with the county, which Ms. Derrick failed to do. Ms. Derrick received a property disclosure form which stated that the septic system was permitted for five bedrooms and one owner said that he “called the county”. After closing, the buyer discovered that the septic system could only accommodate three bedrooms and incurred expenses to expand the system.

MARYANN DEBLANCO (Charlotte) – Following a hearing, the Commission permanently revoked the license of Ms. DeBlanco, effective October 4, 2018. The Commission found that Ms. DeBlanco, persuaded a property owner to allow her to rent from him without executing a written lease, failed to make her rental payments in a timely manner and sometimes not at all, refused to surrender the property to the owner and was ultimately evicted. Ms. DeBlanco later persuaded another property owner to allow her to be a tenant and again failed to execute a written lease prior to moving in. Multiple checks issued by Ms. DeBlanco for rent payments were returned as insufficient by the bank. Ms. DeBlanco was ultimately evicted and appealed her eviction to the appellate courts, which ultimately ruled in favor of the homeowner. Ms. DeBlanco caused extensive damage to the property while she was a tenant. In Ms. DeBlanco’s 2012 application for licensure, she misrepresented to the Commission that she had no previous criminal convictions, liens, or judgments against her, when in fact she did.

CHRISTOPHER LEE DOWDY (Morrisville) – By Consent, the Commission revoked the broker license of Mr. Dowdy effective October 17, 2018. The Commission found that Mr. Dowdy inappropriately utilized a listed property for personal use without the owner’s knowledge or consent. Mr. Dowdy’s conduct was improper and unworthy of a real estate license.

DAVID T. FOWLKES (Lake Gaston) – By Consent, the Commission suspended the broker license of Mr. Fowlkes for a period of 12 months effective September 25, 2018. The Commission then stayed the suspension and prohibited Mr. Fowlkes from acting as a broker-in-charge or qualifying broker of a firm for two years from this order’s effective date and from practicing property management for seven years from the effective date. The Commission found that Mr. Fowlkes, qualifying broker and broker-in-charge of a firm which primarily managed vacation rental properties, failed to supervise unlicensed individuals who were co-owners and failed to properly maintain trust accounts. The unlicensed individuals converted trust money and then returned it to the trust accounts when the discrepancy was found by a Commission audit. Mr.Fowlkes failed to adequately monitor the accounts for suspicious activity and, as a result, was not aware the money had been taken The Commission noted that Mr. Fowlkes was proactive in notifying property owners and insuring their money was returned.

LEONARD DION GAMBLES (Raleigh) – By Consent, the Commission reprimanded Mr. Gambles effective January 10, 2019. The Commission found that Mr. Gambles, acting as buyers agent in a transaction, failed to clarify with his buyer client what repairs were requested and subsequently agreed to be performed by the seller, and failed to confirm that a due diligence repair agreement was signed by the seller during the due diligence period. The seller did make certain repairs, but after closing the buyer expressed dissatisfaction with the repairs. Mr. Gamble’s firm has offered to have the buyer’s inspector re-inspect the property and to pay for any repairs which had not been properly completed.

STEVEN K. GOODMAN (Huntersville) – By Consent, the Commission suspended the broker license of Mr. Goodman for a period of six months effective February 1, 2019. The Commission then stayed the suspension for a probationary period through August 1, 2019. The Commission found that Mr. Goodman, a qualifying broker and broker-in-charge, supervised a provisional broker who served as the listing agent for a commercial property on which a residential house was located with the owner residing there at the time of listing. The owner told the provisional broker that the property was served by city water and city sewer. Without independently verifying city sewer service, the provisional broker advertised the property in the MLS as being connected to the city sewer. After closing, the buyer discovered a septic tank on the premises and was informed by the city that the property was connected to city water but not city sewer.

DONNA FRICK HORBURY (Blowing Rock) –The Commission accepted the permanent voluntary surrender of the broker license of Ms. Horbury effective December 31, 2018. The Commission dismissed without prejudice allegations that Ms. Horbury violated provisions of the Real Estate License Law and Commission rules. Ms. Horbury neither admitted nor denied misconduct.

WILLIAM EDGAR HOWELL III (Belmont) – By Consent, the Commission reprimanded Mr. Howell effective November 14, 2018. The Commission found that Mr. Howell timely reported a July 2018 DWI Level 5 conviction to the Commission and is currently on 18 months supervised probation. Mr. Howell disclosed on his license application convictions for Driving After Consuming Under Age 21 in 2004 and DWI Level 2 in 2005. Mr. Howell failed to report an August 2017 Misdemeanor Possession of Marijuana up to ½ Oz to the Commission.

DON ANTHONY JOHNSON (Cary) – By Consent, the Commission suspended the broker license of Mr. Johnson for a period of six months stayed effective December 12, 2018, ordered Mr. Johnson to comply with all of the provisions of his court-ordered probation and any DMV restrictions on his license, and prohibited Mr. Johnson from transporting customers or clients while his vehicle is equipped with an ignition interlock device. The Commission found that Mr. Johnson timely reported his June 14, 2018, Level 2 DWI conviction. Mr. Johnson received twelve months of supervised probation and is required to have an ignition interlock device on his vehicle. Mr. Johnson had previously been convicted of Level 4 DWI in 2013 and states that he is actively involved in support groups and has abstained from alcohol since the arrest.

GEORGE K. JOSEPH (Charlotte) – By Consent, the Commission reprimanded Mr. Joseph effective January 9, 2019. The Commission found that in and around July 23, 2018, a complaint was filed against Mr. Joseph, who failed to respond to multiple Letters of Inquiry.

CAROLE ANN LANIER (Emerald Isle) – By Consent, the Commission permanently revoked the broker license of Ms. Lanier effective October 17, 2018. The Commission found that Ms. Lanier, as qualifying broker and broker-in-charge of a vacation rental management firm, failed to maintain trust account records, did not reconcile the firm’s trust account, commingled trust funds with her personal funds, and converted trust funds for personal use. A Commission audit of the firm’s trust account revealed a shortage of at least $81,752.

JOSHUA JOE MILLER (Greensboro) – By Consent, the Commission suspended the broker license of Mr. Miller for a period of 18 months effective September 25, 2018.  The Commission then stayed the suspension for a probationary period through March 25, 2020, and ordered that Mr. Miller not act as a broker-in-charge or qualifying broker of a firm dealing in property management for five years from the effective date of the order. The Commission found that Mr. Miller was the broker-in-charge and qualifying broker of a real estate brokerage firm which worked closely with a property management firm which it often paid through its operating account. The license of the property management firm was previously revoked by the Commission because its unlicensed owner had signature authority over the accounts, among other things, in violation of the firm’s probation. An audit of the trust accounts of Mr. Miller’s firm found: deficit spending; journals which failed to identify the check number; payee and purpose of disbursements; lack of an audit trail; failure to perform monthly bank reconciliations; ledger sheets which failed to identify the property, owners and tenants and from whom monies were received; regular use of the same check numbers; and shortages in excess of $17,000. Multiple checks were also being cashed by an unlicensed assistant who had signature authority for the accounts of Mr. Miller’s firm. Mr. Miller designated himself as qualifying broker, despite not having a principal interest in the firm.

WILLIAM D NICHOLS (Matthews) – The Commission accepted the permanent voluntary surrender of the broker license of Mr. Nichols effective January 9, 2019. The Commission dismissed without prejudice allegations that Mr. Nichols violated the Real Estate License Law and Commission rules. Mr. Nichols neither admitted nor denied misconduct.

OPOSSUM SERVICES GROUP LLC (Raleigh) – By Consent, the Commission reprimanded Opossum Services Group effective September 25, 2018. The Commission found that Opossum Services Group managed a residential property and executed a lease on behalf of the owner with an initial term ending July 31, 2017, and a requirement that notice of termination be given by either party at least 60 days prior to the end of the initial term. Opossum Services Group, after being notified by the owners of their intention to retake possession of the property in August, claims to have notified the tenants of this fact in May. However, the tenants dispute receiving notice and instead gave notice of lease termination to Opossum Services Group in June to be effective at the end of August. This caused the owner to incur additional temporary living expenses. Opossum Services Group failed to update the homeowners association of the firm’s new address, resulting in its not receiving notices regarding the property. Opossum Services Group failed to reply to Letters of Inquiry sent by the Commission within 14 days of receipt. The Commission notes that the parties have reached a civil settlement.

SALTBLOODED LLC (Emerald Isle) – By Consent, the Commission permanently revoked the firm license of Saltblooded LLC effective October 17, 2018. The Commission found that the qualifying broker and broker-in-charge of Saltblooded LLC, a vacation rental management firm, failed to maintain trust account records, did not reconcile the firm’s trust account, commingled trust funds with personal funds, and converted trust funds for personal use. A Commission audit of the firm’s trust account revealed a shortage of at least $81,752.

JOHN H. SWITZER (Greensboro) – By Consent, the Commission reprimanded Mr. Switzer effective September 25, 2018 and prohibited Mr. Switzer from acting as the qualifying broker or broker-in-charge of a property management firm for two years from the effective date of this order. The Commission found that Mr. Switzer was the broker-in-charge of a firm that worked closely with a property management firm which it often paid through its operating account. The license of the property management firm was previously revoked by the Commission because its unlicensed owner had signature authority over the accounts, among other things, in violation of its probation. An audit of the trust accounts of Mr. Switzer’s firm found: deficit spending; journals which failed to identify the check number, payee, and purpose of disbursements; lack of an audit trail; failure to perform monthly bank reconciliations; ledger sheets which failed to identify the property, owners and tenants and from whom monies were received; the same check numbers being used on a regular basis; and shortages. Multiple checks were also being cashed by an unlicensed assistant who had signature authority for the firm’s accounts. Mr. Switzer designated himself as qualifying broker, despite not having a principal interest in firm.

BEENA TARUN THAKKAR (Charlotte) – By Consent, the Commission reprimanded Ms. Thakkar effective December 4, 2018. The Commission found that Ms. Thakkar, in selling her personal property, failed to disclose material facts to a potential buyer. Ms. Thakkar received an inspection report from a failed transaction and then failed to disclose material facts contained in that inspection report prior to relisting the property or during the subsequent transaction.

TURN KEY PROPERTY MANAGEMENT INC (Fayetteville) – The Commission accepted the permanent voluntary surrender of the firm license of Turn Key Property Management effective November 1, 2018. The Commission dismissed without prejudice allegations that Turn Key Property Management violated provisions of the Real Estate License Law and Commission rules. Turn Key Property Management neither admitted nor denied misconduct.

ALLYSON GAYLE WARD (Charlotte) – By Consent, the Commission suspended the broker license of Ms. Ward for a period of 12 months effective January 1, 2019. The Commission then stayed the suspension on certain conditions. The Commission found that Ms. Ward, acting as the broker-in-charge for Mi Casa Su Casa Rentals and Carolina Girls Real Estate, both sole proprietorships, failed to properly maintain her trust account and its records in compliance with Commission rules. An audit of Ms. Ward’s trust account revealed a shortage of trust funds. Ms. Ward’s lease agreements contain an illegal automatic tenant security deposit forfeiture clause. Ms. Ward took affirmative steps to correct the trust account compliance deficiencies and to correct the lease agreements.

ERIC MICHAEL WEAVER SR. (Raleigh) – By Consent, the Commission reprimanded Mr. Weaver effective September 25, 2018 and prohibited him from engaging in property management for a period of three years. The Commission found that Mr. Weaver, acting as broker-in-charge of a firm which managed a residential property, executed a lease on behalf of the owner with an initial term ending July 31, 2017, and a requirement that notice of termination be given by either party at least sixty days prior to the end of the initial term. Mr. Weaver, after being notified by the owners of their intention to retake possession of the property in August, claims to have notified the tenants of this fact in May. However, the tenants dispute receiving notice and instead gave notice of lease termination to Mr. Weaver in June to be effective at the end of August. This caused the owner to incur additional temporary living expenses. Mr. Weaver failed to update the homeowners association of the property with his firm’s new address, resulting in him not receiving notices regarding the property. Mr. Weaver failed to reply to Letters of Inquiry sent by the Commission within 14 days of receipt. The Commission notes that the parties have reached a civil settlement.

WESGATE PROPERTIES INC. (Roxboro) – By Consent, the Commission reprimanded Wesgate Properties effective October 1, 2018. The Commission found that Wesgate Properties failed to properly maintain trust accounts in compliance with Commission rules: checks did not include the words “Trust Account” or “Escrow Account,” deposit tickets were not properly labeled, property/owner ledgers were not maintained, and reconciliations were not performed. Wesgate Properties failed to provide signed Rental Management Agreements for all clients and some lease provisions were not in compliance with North Carolina Law.

BRYAN S. WESTMORELAND (Roxboro) – By Consent, the Commission reprimanded Mr. Westmoreland effective October 1, 2018. The Commission found that Mr. Westmoreland was a qualifying broker and broker-in-charge and failed to properly maintain trust accounts in compliance with Commission rules: checks did not include the words “Trust Account” or “Escrow Account,” deposit tickets were not properly labeled, property/owner ledgers were not maintained, and reconciliations were not performed. Mr. Westmoreland failed to provide signed Rental Management Agreements for all clients and some lease provisions were not in compliance with North Carolina law.

THECLA L. WIDENHOUSE (Concord) – By Consent, the Commission reprimanded Ms. Widenhouse effective September 25, 2018. The Commission found that Ms. Widenhouse listed a property and advertised it as having five bedrooms and connected to city sewer service, when in fact, the house is only permitted to have three bedrooms and is not connected to the city sewer.

WILKES & ASSOCIATES REAL ESTATE & RENTAL PROPERTIES (Rockingham) – The Commission accepted the permanent voluntary surrender of the firm license of Wilkes & Associates Real Estate & Rental Properties effective October 17, 2018. The Commission dismissed without prejudice allegations that Wilkes & Associates Real Estate & Rental Properties violated provisions of the Real Estate License Law & Commission rules. Wilkes & Associates Real Estate & Rental Properties neither admitted nor denied misconduct.

CANDI GARRISON WILKES (Rockingham) – The Commission accepted the permanent voluntary surrender of the broker license of Ms. Wilkes effective October 17, 2018. The Commission dismissed without prejudice allegations that Ms. Wilkes violated provisions of the Real Estate License Law and Commission rules. Ms. Wilkes neither admitted nor denied misconduct.

BROCK GEORGE ZEVAN (Huntersville) – By Consent, the Commission suspended the broker license of Mr. Zevan for a period of 36 months effective December 10, 2018. Twelve months of the suspension are active with the remainder stayed for a probationary period of 24 months from December 10, 2019 to December 10, 2021. The Commission further ordered that Mr. Zevan not further engage in or receive compensation from property management and not act as a broker-in-charge for a period of five years from December 10, 2018. The Commission found that Mr. Zevan, the broker-in-charge and qualifying broker of a firm, engaged in property management, and failed to update his firm’s current address with the Commission. A review of the firm’s trust accounts found: the accounts were not labeled “trust” or “escrow”, comingling of entrusted funds, entrusted funds converted to Mr. Zevan’s personal use, deficit spending, failure to perform monthly reconciliations, lack of a trial balance, lack of required documentation, and a shortage.  The Commission also found that the firm was administratively dissolved by the NC Secretary of State’s Office from January 14, 2016, through June 16, 2016, and that Mr. Zevan failed to notify the Commission. The Commission noted that another licensed firm has since taken over the management of the firm’s properties and Mr. Zevan no longer engages in property management.

XIANG YUAN ZHONG (Raleigh) – By Consent, the Commission reprimanded Ms. Zhong effective December 14, 2018. The Commission found that Ms. Zhong, a qualifying broker and broker-in-charge, listed her personal residential investment property for sale through her firm and advertised the square footage as being 3,175. Ms. Zhong did not measure the subject property, but instead relied on county tax records. After the subject property went under contract, subsequent professional measurements found that the subject property had 2,956 and 3,019 square feet, respectively. The property had two HVAC systems, one on each floor. Ms. Zhong identified the age of both systems on the Residential Property and Owner’s Association Disclosure Statement as “2 up and 13 down”. The inspection revealed that although the air conditioning unit was replaced on the second floor, the furnace was actually 13 years old. The buyers under contract ultimately terminated the transaction during the due diligence period and received their earnest money deposit. Ms. Zhong then delisted the subject property.

Are Property Managers Equipped to Handle Rental Fraud?

Transunion, one of the “big three” U.S. credit reporting agencies and a self-described “sophisticated, global risk information provider” recently released highlights of a study suggesting that most U.S. property managers have trouble identifying, mitigating and preventing rental fraud in the single and multi-family rental industries.

According to Transunion’s news release, the commissioned study by Forrester Consulting found that 80 percent of surveyed decision makers at property management companies have experienced fraud up to 20 times within the past two years “but due to the emerging nature of the problem, … are not well equipped to manage the issue.”

The study is based on an online survey of 153 U.S. single and multi-family property management organizations and their decision makers. The study was completed in August 2018 and found that nearly 59 percent of rental applications are submitted online and are a primary driver of rental housing industry fraud. And, according to the news release, more than half of the surveyed companies “identified online applicant-based fraud as a critical or near critical issue.”

Transunion says that property managers need to be more aware of the key forms of rental application fraud currently taking place:

• “Synthetic fraud”, “a new weapon of choice for sophisticated fraudsters” involves manufactured rental applicant identities. If the application is approved,the scammer uses the address to establish credit and run up high balances under the false identity. Property managers are stuck with a non-existent tenant from whom rent cannot be collected.

• “Digital fraud”, which is increasing due to the use of manufactured identities, often involves “backroom operations” that run identity and credit cards to find a potential “match,” using spoofed IP addresses to indicate that the rental applicant is local.

• “True name fraud” involves scammers who obtain and use stolen pieces of otherwise valid identity information (name, date of birth, social security number) for a rental application which, if approved, leaves the property manager at risk and the identity theft victim potentially “on the hook for an apartment they never applied for.”

According to the study, “95% of property managers admitted to experiencing difficulties identifying, mitigating or preventing fraud. A significant problem that was acknowledged was the time frame in which the incidence of fraud was first recognized. Three out of four property managers identified fraud after move-in, with more than one-quarter discovering the fraud much later into their lease—seven months or later.”

Mike Doherty, Senior Vice President in TransUnion’s rental screening business commented, “In all of these cases of fraud, a property manager will find that the resident they may try to evict does not actually exist or is not the person in their rental unit. As a result, the property management company can lose thousands of dollars of potential income and impact their hard-earned reputation.” Transunion also said that these sorts of rental application fraud “can quickly become an expensive problem” and that “It can take anywhere from 90–150 days to evict a tenant, and additional expenses such as lost rent, back rent, and leasing and marketing costs can also pile up.”

[Source: Transunion news release: “Fraud: The New Operational Headache in Property Management.” Note: Transunion offers several identity theft and fraud detection and prevention products and services. ARELLO does not endorse any particular products or services or warrant their effectiveness, suitability for a particular purpose, or compliance or non-compliance with any applicable laws.-Ed.]

© ARELLO®. Reprinted courtesy of ARELLO’s Boundaries magazine.

Recent Arrests, Jury Verdict Highlight Ongoing Need for Wire Fraud Diligence

A recent international law enforcement sweep and a federal court decision upholding a jury’s negligence verdict against a Kansas real estate agent serve as strong reminders of the ongoing need for all transaction participants to be aware of the very real threat of real estate escrow/closing wire fraud.

The Arrests: In June, the U.S. Department of Justice (DOJ), the Federal Bureau of Investigation (FBI) and other cooperating federal agencies announced the arrest of over 80 individuals in the U.S., Nigeria, Canada, Mauritius, Poland and other countries in connection with various alleged business e-mail compromise (BEC) scams. The FBI says that these sophisticated scams often target employees with access to company finances and trick them in various ways into making wire transfers to bank accounts that are thought to belong to trusted partners, but actually belong to criminals. The arrests were accomplished with the cooperation of law enforcement entities in Canada and several other countries, identified millions of dollars in hijacked transaction funds, and seized or disrupted the fraudulent transfer of millions more. The FBI says that since its Internet Crime Complaint Center (IC3) began keeping track of BEC and its variant, the e-mail account compromise (EAC), there has been a loss of over $3.7 billion reported to the IC3.

Real Estate Escrow Wire Scams on the Rise: In connection with the arrests, the Department of Justice said, “The same criminal organizations that perpetrate BEC also exploit individual victims, often real estate purchasers, the elderly, and others, by convincing them to make wire transfers to bank accounts controlled by the criminals.” Real estate escrow wire fraud involves criminals who digitally impersonate sellers, real estate licensees, title companies and other transaction participants in order to accomplish the fraudulent diversion of transaction funds. According to the FBI, “From calendar year 2015 to calendar year 2017 there was over an 1100% rise in the number of BEC/EAC victims reporting the real estate transaction angle and an almost 2200% rise in the reported monetary loss.”

Jury Holds Licensee Liable: The U.S. District Court for the District of Kansas recently upheld a jury verdict against a seller’s representative and her brokerage company in a transaction marred by escrow/closing wire fraud. According to the posttrial decision in the case, “An unknown criminal  inserted himself into the transaction through emails, including with the use of fake email accounts with names similar to the accounts used by participants in the transactions, with the result that plaintiff [the buyer] lost the purchase price of $196,622.67 when he wired that amount to a bank account controlled by the criminal.” As summarized in the court decision, the evidence reflected that the criminal accomplished this by creating fake closing instructions and sending them to the seller’s representative, who then allegedly forwarded them to the buyer. The seller’s representative denied that she sent the email containing the fake instructions. The jury assigned 85 percent of the fault to the seller’s representative and 15 percent to the buyer. Accordingly, the U.S. District Court entered judgment for the buyer in the amount of $167,129.27.

The seller’s representative brought post-trial motions challenging the verdict, alleging that there was insufficient evidence to support it. The court denied the motions and ruled, among other things, that:

• The jury could reasonably have found that in supplying the wiring instructions to the buyer, the seller’s representative was impliedly asserting that those instructions were correct.
• The jury could reasonably have concluded that the seller’s representative failed to act with reasonable care because she “conceded in her testimony … that she did not confirm that she had the correct instructions (despite oddities in the instructions, such an incomplete out-of-the-area bank address) and that she had the responsibility to make sure that she sent accurate information to [the buyer].”
• There was sufficient evidence to support the jury’s finding that the buyer, an experienced real estate investor, reasonably relied on the instructions received.

Resources: While real estate escrow/closing wire fraud scams have been widely reported, it is apparent that only heightened diligence on the part of all transaction participants will reduce the continuing risks. Numerous resources providing information about these scams and how to avoid them have been generated by industry associations, consumer groups, regulators and many others. Here are a few selected examples:

• According the National Association of REALTORS®, several of its state associations have generated suggested wire fraud notices that explain the risks to clients and how to avoid being victimized. [Please note: Such notices are or may be subject to copyright laws-Ed.]
• Numerous federal agencies have issued warnings and tips, including the Consumer Financial Protection Bureau, the Federal Trade Commission (in cooperation with NAR) and the FBI/IC3.
• Warnings and advice to real estate and other licensees, and consumers, have been issued by regulators in dozens of jurisdictions, including Colorado, New Jersey and Utah; and in the Idaho Real Estate Commission’s most recent The Real Estatement publication and a previous edition of the North Carolina Real Estate Commission’s Real Estate Bulletin.

© ARELLO®. Reprinted courtesy of ARELLO’s Boundaries magazine.

Licensees as of January 1, 2019

Spotlight: Anna Gregory Wagoner, Commission Chair

Anna Gregory Wagoner, of Winston-Salem, is the current Chair of the North Carolina Real Estate Commission.

Ms. Wagoner is a shareholder with the law firm of Blanco Tackabery & Matamoros, P.A. in Winston-Salem and practices in the areas of commercial real estate and renewable energy.

Active in the practice of real estate law for approximately 18 years, Ms. Wagoner began her legal career in Greensboro and was formerly associated as an attorney with Investors Title Insurance Company, of Chapel Hill.

Ms. Wagoner is a member of the North Carolina Bar Association, Forsyth County Bar Association, Piedmont Triad Commercial Real Estate Women, North Carolina Land Title Association, and NAIOP (Commercial Real Estate Development Association).

She is a graduate of Wake Forest University with a BA in Psychology and holds a Juris Doctor degree from the Wake Forest University School of Law.

Appearances

Rob Patchett, Associate Legal Counsel II, spoke at the Vacation Rental Management Association (VRMA) Connect NC event.

Anna Gregory Wagoner Elected Chair, Thomas R. Lawing, Jr., Vice Chair

Anna Gregory Wagoner, of Winston-Salem, has been elected Chair of the North Carolina Real Estate Commission and Thomas R. Lawing, Jr., of Charlotte, Vice Chair, for the term beginning August 1, 2018, it was announced by Miriam J. Baer, Executive Director.

Ms. Wagoner is a shareholder with the law firm of Blanco Tackabery & Matamoros, P.A. in Winston-Salem and practices in the areas of commercial real estate and renewable energy.

Active in the practice of real estate law for approximately 18 years, Ms. Wagoner began her legal career in Greensboro and was formerly associated as an attorney with Investors Title Insurance Company, of Chapel Hill.

Ms. Wagoner is a member of the North Carolina Bar Association, Forsyth County Bar Association, Piedmont Triad Commercial Real Estate Women, North Carolina Land Title Association, and NAIOP (Commercial Real Estate Development Association).

She is a graduate of Wake Forest University with a BA in Psychology and holds a Juris Doctor degree from the Wake Forest University School of Law.

Lawing, a former Chair of the Commission, is a Certified Property Manager and President of T. R. Lawing Realty, a family-owned residential property management company serving the Charlotte regional since 1957.

He is a past president and REALTOR® of the Year of both the NC REALTORS® and the Charlotte Regional REALTORS® Association (CRRA) and a past director of the National Association of REALTORS® (NAR).

Active in civic affairs, Lawing has held leadership positions at Hawthorne Lane United Methodist Church, is a past president of the Charlotte West Rotary, past chair of the Eagle Projects Committee of the Mecklenburg County Council of the Boy Scouts of America and has co-chaired the Will Call Committee of the Wells Fargo Championship since its inception.

This article came from the October 2018-Vol49-2 edition of the bulletin.

Wendell Bullard, Jeffery J. Malarney Appointed to Commission

Wendell Bullard of Durham and Jeffery J. Malarney of Manteo have been appointed to the North Carolina Real Estate Commission by Governor Roy Cooper, it was announced by Miriam J Baer, Executive Director.

Bullard is Managing Broker at Bullard Properties, LLC, in Durham and has over 22 years of experience in the real estate industry including affiliations with Prudential Carolinas Realty, and Realty Executives Triangle Southpointe (Co-Owner).

He is past president of the Durham Regional Association of REALTORS® and the North Carolina Association of REALTORS® and past REALTOR® of the Year in both organizations.

One of several founding members for charter high schools in Charlotte and Raleigh, Bullard is past treasurer for Commonwealth and Stewart Creek High Schools and past board president of Central Wake Charter High School in Raleigh.

He is a graduate of North Carolina Central University with a BS in marketing and a United States Air Force Security Specialists veteran.

Malarney, a former member of the Real Estate Commission, serves as General Counsel for Twiddy & Company, a North Carolina Vacation Rental Management Firm, 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 holds a JD from Wake Forest University School of Law and BA (cum laude) in Economics and Management from Albion College.

This article came from the October 2018-Vol49-2 edition of the bulletin.

Avoid These 10 Common Mistakes to Make Trust Account Management Trouble Free

By Jean A. Wolinski-Hobbs, Auditor/Investigator

The Real Estate Commission has three rules governing how brokers handle and account for trust monies – A.0116, .0117, and .0118.  Additionally, the ncrec.gov website has a number of videos available on trust account handling.  Familiarize yourself with these rules to avoid the following common mistakes.

1. DO YOU deposit money into the trust account and then move the money into an operating account to pay clients or invoices?

A variation on the same theme is depositing trust monies into an operating account and then transferring them into the trust account.  Well, DON’T!  All trust monies must be deposited into a trust account and all clients and invoices need to be paid out from the trust account.  The only time it is acceptable to move money from a trust account into an operating account is when you are disbursing your earned commission or are reimbursing yourself for invoices that were paid by you from your operating account in advance and on behalf of the client.

If the bank account into which you deposit client monies is not identified as a trust or escrow account, then it will not be treated as such by the IRS or courts, meaning they can attach or freeze the monies. The FDIC may also deny insurance coverage for each individual customer whose money is deposited into an account not properly designated.

2. DO YOU pay client proceeds before the rent or other incoming money clears the account?

Well, DON’T!  Ensure that incoming funds clear prior to paying the client or any invoices on behalf of the client.  Failure to do so can cause a deficit in the account if the funds do not clear.

3. DO YOU allow bank service fees to be charged against the trust account and then reimburse the account after the fact?

Well, DON’T!  This also causes a deficit in the account. Instead, make sure that service charges are covered by depositing enough of your own money to cover them and keep a ledger to keep track of those personal funds.

4. DO YOU leave interest, commissions, reservation fees or monies for credit/background checks that belong to the broker or others in the trust account beyond 30 days?

Well DON’T! To do so is commingling. Also, don’t use a money market  account if it requires a large balance of personal funds in order to avoid service fees – that is also commingling.  Money market accounts are acceptable if there is a large enough  balance of customer funds, such as a security deposit trust account holding a substantial number of deposits.

5. DO YOU allow your client to be a signatory on the trust account?

Well, DON’T!  Trust accounts must be custodial and if the owner of the funds has access to make their own deposits or withdrawals, then it is no longer a custodial account.

6. DO YOU deposit multiple homeowners’ association monies into one trust account?

Well, DON’T!  Homeowner’s associations must each have their own individual trust account.  If you manage ten (10) homeowner’s associations, then you must maintain at least ten (10) trust accounts.

7. DO YOU allow your bookkeeper to handle every aspect of maintaining and reconciling the trust account?

Well, DON’T! Embezzlement happens even with trusted bookkeepers or long-time employees and is made easier when one person is in charge of everything. Simple steps can help ensure that trust money is safeguarded. For example, the person who receives cash should not be the same person who reconciles the trust account.  Cash receipts should be verified at the end of each day and logged by the broker-in-charge or another person in a supervisory role. And, the bookkeeper should not be the person initially receiving the bank statement. The broker-in-charge should verify the items in the bank statement against the journal and also check cash receipts against deposits on a monthly basis, prior to the reconciliation.  A bookkeeper who never takes vacations or is obsessed with getting the mail is not a good thing, it is a RED FLAG.

8. DO YOU take possession of checks or cash but deposit the items directly into a client’s account?

Well, DON’T!  If you “touch” the money, then you must have a trust account and the money must go through your trust account.  If the check is written to the client, do not accept it.  The only time it is acceptable for a broker to deliver monies to a client is when the payment  is subject to a specific exception such as a due diligence check or check payable to a designated escrow agent.

9. DO YOU use trust account money to pay for repairs to a property if the client does not have sufficient funds in the trust account to cover the repair?

Well, DON’T!  Just because there is $50,000 in the trust account does not mean that you can pay for a new water heater costing $1000 for client Smith if only $200 of the $50,000 belongs to client Smith. To do so means you are using other clients’ money to pay for client Smith’s water heater and causing a deficit in client Smith’s ledger.  No client should ever have a negative balance on their ledger.

10. DO YOU disburse late fees or commissions even if the tenants have not paid the late fee or paid rent for the month?

Well, DON’T!  If a tenant owes a $15 late fee but has not paid that amount, do not pay yourself or the client the late fee.  Disbursements on rentals must be calculated upon the amount actually paid for that month.

*****

If this sounds confusing, you are not alone.  Come to one of our monthly trust account courses and learn the rules in detail.  Bring along anyone who also handles trust accounts for your firm.  As a broker-in-charge, at a minimum you will learn what you need to know to adequately supervise your bookkeeper and what you or your software program needs to be able to produce in the way of reports in order to be compliant.  As a bonus, it qualifies as an elective continuing education course.

This article came from the October 2018-Vol49-2 edition of the bulletin.

Sellers Required by Law to Provide Two Disclosure Statements to Buyers

By Elizabeth W. Penney, Information Officer

Brokers know that most sellers of residential property are required by law to give the buyer two disclosure forms: the Residential Property and Owners’ Association Statement (RPOADS) and the Mineral and Oil and Gas Rights Mandatory Disclosure Statement (MOGS).

The four-page RPOADS form should be given prior to an offer to purchase. The seller has the option of answering each question “yes’, “no,” or “no representation.” Thus, while it is a mandatory disclosure form, it does not actually mandate any disclosure because of the “no representation” option. Sellers who choose to answer the questions “yes” or “no” should do so honestly, based on their actual knowledge as a seller can be held accountable in a court of law for the truth and accuracy of the representations made.

Sellers and brokers should understand that regardless of the seller’s decision to disclose issues and defects concerning the property, a broker must disclose any material facts to a prospective buyer. If a home inspection reveals a significant defect and the seller refuses to repair, that defect becomes a material fact which the agent has discovered and must disclose affirmatively to prospective buyers.

If the seller originally answered any of the relevant questions “no”, then the broker should also advise the seller-client to amend the RPOADS once a defect becomes known to avoid charges of misrepresentation and fraud. If the seller decides not to disclose, the seller still has the option of “no representation” but, again, the broker still must disclose the known material fact separately from the RPOADS.

Failure to provide the RPOADS can have consequences. The statement should be provided to a prospective buyer prior to the buyer making an offer. A seller or listing agent who fails to present a completed statement prior to an offer being extended opens the door to the possibility of the buyer rescinding the contract within either three days of contract formation or three days from receipt of the statement, whichever occurs first. It is the listing agent’s duty to inform seller-clients of their rights and obligations regarding the completion and distribution of this mandatory form.

Additionally, sellers of residential property are now required by law to give the buyer the single-page MOGS form prior to the Offer to Purchase. The seller has the option to mark “no representation” only as to the severance of mineral or oil and gas rights by a previous owner.

It is important to note that the fact the property is investment property and has not been owner-occupied does not negate the obligation of the seller to provide a disclosure statement to prospective buyers. When in doubt as to whether the RPOADS or MOGS must be given in a certain transaction, sellers should contact the Commission or err on the side of caution and provide the Statement.

Exemptions to Providing RPOADS/MOGS Disclosure Forms

North Carolina state law (General Statute Chapter 47E) requires that the RPOADS/MOGS be given in all transfers of residential one-to-four unit dwellings by sale, exchange, installment land sales contract or option to purchase, subject to a few very narrow exceptions in  NCGS § 47E-2 as shown below:

NCGS § 47E-2 (a)… [RPOADS/MOGS exemptions]

(1)  Transfers pursuant to court order, including transfers ordered by a court in administration of an estate, transfers pursuant to a writ of execution, transfers by foreclosure sale, transfers by a trustee in bankruptcy, transfers by eminent domain, and transfers resulting from a decree for specific performance.

(2)  Transfers to a beneficiary from the grantor or his successor in interest in a deed of trust, or to a mortgagee from the mortgagor or his successor in interest in a mortgage, if the indebtedness is in default; transfers by a trustee under a deed of trust or a mortgagee under a mortgage, if the indebtedness is in default; transfers by a trustee under a deed of trust or a mortgagee under a mortgage pursuant to a foreclosure sale, or transfers by a beneficiary under a deed of trust, who has acquired the real property at a sale conducted pursuant to a foreclosure sale under a deed of trust.

(3) Transfers by a fiduciary in the course of the administration of a decedent’s estate, guardianship, conservatorship, or trust.

(4) Transfers from one or more co owners solely to one or more other co owners.

(5)  Transfers made solely to a spouse or a person or persons in the lineal line of consanguinity of one or more transferors.

(6)   Transfers between spouses resulting from a decree of divorce or a distribution pursuant to Chapter 50 of the General Statutes or comparable provision of another state.

(7)  Transfers made by virtue of the record owner’s failure to pay any federal, State, or local taxes.

(8)  Transfers to or from the State or any political subdivision of the State.

NCGS § 47E-2 (b)… [Additional RPOADS exemptions]

(1)  Transfers involving the first sale of a dwelling never inhabited.

(2)  Lease with option to purchase contracts where the lessee occupies or intends to occupy the dwelling.

(3)   Transfers between parties when both parties agree not to complete [the RPOADS].

This article came from the October 2018-Vol49-2 edition of the bulletin.