By Fred Moreno, Chief Deputy Legal Counsel
Year after year it seems that multiple cities across the state of North Carolina continue to show up on “Best of” listings and rankings. These accolades tend to bring new companies, more jobs, and an increase in population to those regions which create a demand for housing and new clients for real estate brokers.
Did you know that many of the people that make up these increases in population might be immigrants? It has been reported that the immigrant population in NC has increased from 1.7% in 1990 to 7.6% in 2014, and has steadily increased year after year.
From 2000 to 2010, NC’s Latino population, for example, ranked sixth in the nation for growth, according to the UNC Charlotte Urban Institute. With these increases to the market population, some brokers are trying to build future potential immigrant client bases by engaging in their representation. As with all clients, brokers must exercise skill, care and diligence.
Probably the largest hurdle in the representation of certain immigrant populations is that of language. Many brokers believe that certain immigrant populations do not speak English very well, if at all. However, a 2012 study by the U.S. Census Bureau found that 44% of the foreign-born population age 5 and older, who arrived in the United States in the year 2000 or later, reported high English-language speaking ability.
This may be due to the global economy and its ability to spread English music, literature, and entertainment to other parts of the world quickly. It may also be due to other countries requiring school aged children to take English courses as part of that country’s education curriculum. So, the chances that an immigrant would in fact speak English seem to be pretty good. Even in cases where a broker’s client cannot speak English, if that client has children that were born in the U.S., chances are that their children may speak English along with their parent’s native language very well.
According to a 2013 study conducted by the Pew Research Center, 73% of Latinos ages 5 and older said they speak Spanish at home and 89% of U.S.-born Latinos spoke English proficiently. It is quite common to see children act as “translators” for their parents in many situations. However, brokers should proceed with this line of communication with caution. It is difficult to know if your message is being delivered to your client exactly as you intended or if a different message altogether is being conveyed. Furthermore, there may be words that are “lost in translation” as your client’s language may not have a word similar to the English version.
To help ease the language barrier, there are now several translation options which a broker may choose from simply by tapping their smartphone.
Google, for example, allows you to freely input words, sentences, and paragraphs that can be translated into many foreign languages, all at no cost. This may also help if you can speak a certain language conversationally, but are unfamiliar with specific terms such as “contract” or “agency agreement”.
Other software programs are also readily available for a fee that can do anything from text-to-speech, email, and document translations. Finally, there are easy-to-use software programs used to learn foreign languages, which can provide for immediate understanding of basic terminology to start a conversation.
Despite technological advances in communication, issues may still persist. For example, a broker may not be able to determine if the software program made an accurate translation or if the correct word was translated but was not used in the appropriate grammatical format. The best course to overcome a language hurdle would be to hire a professional translator. Due to the country’s diverse population, certified translators are now more widely available through various business entities.
Additionally, many relevant documents are produced in Spanish language versions. For example, the Working with Real Estate Agents brochure and three Commission Q&A brochures are available in Spanish. Go to www.ncrec.gov/Publications for ordering information. Similarly, NCREALTORS® offers some Spanish language forms for use by its members, including the listing and buyer agency agreements and the 2T Offer to Purchase and Contract.
Another hurdle in the representation of certain immigrant populations is a lack of understanding of the customs or traditions celebrated by that immigrant population. After all, this population may speak a different language, dress differently, celebrate different holidays, and eat differently. When immigrants move to a new area, they may network with people who share their background as this may help with their assimilation to their new environment.
Some brokers may see an opportunity to expand their client base by building relationships within this network. With advances in technology and the Internet, brokers have more information readily available at their fingertips than ever before. Not only could a broker learn to speak the potential client’s native language as discussed above, a broker could also research the various traditions and gift-giving practices that are accepted by diverse cultures.
Implementing these practices through their representation, a broker may soon find that it brings a sense of ease and comfort to their client during what can be a stressful event of buying or renting a home or leasing commercial space. Furthermore, by successfully representing just one member of an immigrant population, a broker may tap into an excellent referral network among this population.
A broker must still use caution, however, when attempting to participate in an immigrant client’s customs or traditions. If a broker does not have a full and complete understanding of a client’s ethnic traditions and cultural background, it could work to their disadvantage. Some immigrant clients my take offense at a broker participating in certain customs or traditions when the broker does not share the same background. In addition to this, brokers must use caution when practicing common American customs and traditions with immigrant clients, as there are certain customs or practices in the U.S. that are at odds with other cultures. For example, in most Asian and Caribbean cultures, it is expected that you take your shoes off when entering someone’s home. Also, touching a person on the arm, although it may seem innocent, might be considered offensive to those who grew up in China, Thailand, Korea, and the Middle East.
Finally, another hurdle in the representation of certain immigrant populations is the belief that those persons would have difficulty in obtaining a loan due to limited credit or with transferring legal documents at closing. While it is true that obtaining financing from a lender may be more difficult for anyone with limited credit history, it is not impossible.
There are a number of loan packages offered by a variety of lenders either through the typical conventional loan or portfolio lender. Also, a number of lenders market to certain immigrant populations and provide assistance by hiring employees who speak their language and by providing translated forms. A broker could gain valuable insight by meeting with these lenders as well and learning what they have to offer. It is also possible that an immigrant client may also decide to pay cash, and this could sidestep most financing concerns.
On the flip side, brokers should expect that the closing process may take longer for immigrant clients than their American counterparts. This may be due to more stringent verification processes required by lenders or source of funds verifications in cash transactions mandated by the Internal Revenue Service. Should a broker decide to engage in the representation of an immigrant client, it would be a good idea to reach out to local law firms that specialize in immigration law for advice.
Due to shifting populations, more and more brokers are interacting with immigrant populations through representation. These potential new clients are searching for housing and looking for persons to communicate with about their new environment. It is also important to know that a broker is still obligated to follow all NC license laws and Commission rules, regardless of the ethnicity of their client or the challenges it may bring. This requires the broker to represent each client competently, and prohibits discriminatory practices.
This article came from the May 2018-Vol49-1 edition of the bulletin.
By Pamela R. Rorie, Continuing Education Officer
A record crowd of more than 250 real estate instructors, school officials, and publisher representatives participated in the 2018 Real Estate Educators Conference held March 27-28 at the Embassy Suites in Cary. Sponsored by the Real Estate Commission, this year’s event featured the theme Get in the Game.
Commission Chair Robert Ramseur opened the conference and welcomed the crowd with comments on the value of education. Commission Executive Director Miriam Baer’s State of the Commission address informed educators that the past year has seen a substantial increase in license applicants, licensees, calls, emails, and information requests and described the Commission’s accomplishments and ongoing projects.
Corean Hamlin, Director of Education and Licensing, entertained the group with a Two Truths and a Lie presentation reviewing recent Education and Licensing changes, statistics, and future initiatives. Hamlin was joined by Director of Regulatory Affairs Janet Thoren to present rule changes becoming effective July 1, 2018.
Jake Gore, Chief Technology Officer, and Diana Carnes, Systems Administrator, introduced the newly developed Instructor Login program, and addressed recent technological updates in various Commission processes and procedures.
During the first day’s luncheon, the North Carolina Real Estate Educators Association (NCREEA) held its spring meeting under the direction of President Len Elder, DREI. Following the business meeting, NCREEA Immediate Past President Oscar Agurs, DREI, officiated the traditional awards presentation and presented its “Program of the Year” award to Sandy Williams, DREI, for her continuing education elective course, Tackling What Ifs, and their “Educator of the Year” award to Len Elder, DREI.
Commission Chair Ramseur presented the Commission’s Larry A. Outlaw Excellence in Education Award to Len Elder. The award was established in memory of Outlaw, an attorney who served as Commission Director of Education and Licensing for 35 years, from the position’s inception until his retirement in 2014.
In the afternoon, educators received updates on Commission education programs. Education and Examination Officer Deborah Carpenter reminded the group of changes to the Prelicensing and Postlicensing programs, and Continuing Education Officer Pamela Rorie reviewed various continuing education processes and presented the topics for the 2018-2019 Update courses. Day one of the conference concluded with a presentation by Education Officer Katherine Buchholz on Interactivity & Engagement in the Classroom.
Day two of the conference opened with keynote speaker Ryan Ohm, Director of Educational Initiatives with REALTOR® University, whose presentation focused on gamification in education. Roundtable discussions followed in which conference attendees responded to various questions posed by Commission staff.
The conference concluded with the Regulatory Affairs Forum titled Myths and Rumors. Commission Regulatory Affairs Director Janet Thoren, Assistant Director of Regulatory Affairs Charlene Moody, Chief Deputy Legal Counsel Fred Moreno, Associate Legal Counsel II Rob Patchett, and Associate Legal Counsel I Madison Mackenzie entertained educators with discussions of myths and rumors that have circulated about the Commission and its processes and procedures.
The Commission thanks North Carolina’s real estate educators for their continued interest and support, and congratulates Sandy Williams, DREI, and Len Elder, DREI, for their accomplishments.
This article came from the May 2018-Vol49-1 edition of the bulletin.
By Stephen L. Fussell, Senior Consumer Protection Officer
The details in this case study are based upon an actual cmplaint. A real estate broker(father) who was also a licensed general contractor listed his daughter’s house for sale at $161,500. The father had built his daughter’s house and nearly every other house in the subject neighborhood. A buyer contracted to buy the daughter’s house at list price. Two weeks later, the buyer’s agent informed the father that the house only appraised at $152,000. The buyer and seller agreed to reduce the sales price to the appraised amount.
The father asked for a copy of the appraisal report and after reviewing it, saw that two of the comparable sales (“comps”) were houses that the father had built in the same neighborhood. The appraisal indicated that both of the comps had 1427 sq. ft. The appraiser had gotten the square footage information for the comps from the MLS system. The father indicated that as the builder, he knew that these comps actually contained 1334 and 1347 sq. ft., respectively. Comparing the advertised square footage with the actual square footage, the square footage errors by the listing broker for the two comps were 7% and 6%, respectively.
The county tax records indicated that the two comps contained 1427 and 1274 sq.ft., respectively. The listing broker claimed to have measured both properties and that the 1427 figure she entered for the second comp was a “typo” because she meant to enter 1274 sq .ft., the same amount indicated in the tax record. However, the evidence in the case indicated that the listing broker used the tax card information instead of measuring and calculating the square footage.
The listing broker eventually corrected the square footage data in the MLS for one of the comps, but did not correct the other comp saying it was too old to be used. However, both comps were still used in the preparation of the appraisal in the subject transaction, because they were in the same neighborhood as the subject property and were comparable in many ways. The subject transaction closed at a sales price that was adversely affected by the incorrect square footage figures entered into the MLS by the listing broker for the two other properties.
Possible violations of the Real Estate License Law in this case study include violations of N.C.G.S. § 93A-6(a)(1), (3), (8), and (10) for misrepresentation of a material fact, false advertising, being unworthy or incompetent to act in a manner which protects the public, and engaging in dishonest dealing, respectively. The broker-in-charge of the firm which listed the two comps also bore the responsibility for ensuring that the advertising for the property was accurate (Commission Rule A.0110(i)(3)).
As indicated in this case study, square footage misrepresentations have the potential to adversely affect more people than just the buyer of the property being misrepresented. Many other buyers, sellers, brokers, appraisers and lenders can be adversely affected. Every broker or appraiser who has used the sales prices of the aforementioned comps when preparing a CMA, BPO or an appraisal may have arrived at incorrect market values or expected selling prices for the properties they were evaluating, because the square footage for the comps were misstated.
Any broker who includes a square footage figure in the MLS or any other form of advertising should exercise great care to accurately determine and report the square footage. A broker should never rely upon tax records, MLS data for previous listings/sales, previous appraisals, blueprints, or the seller’s word for square footage. The Commission’s publication, “Residential Square Footage Guidelines,” is an excellent resource for brokers who measure and calculate square footage themselves.
This article came from the May 2018-Vol49-1 edition of the bulletin.
ETHEL T. CLARK (Fayetteville) – By Consent, the Commission suspended the broker license of Ms. Clark for a period of 12 months effective February 1, 2018. The Commission found that Ms. Clark, as the qualifying broker and broker-in-charge of a licensed real estate firm, failed to maintain the firm’s trust accounts in compliance with Commission Rules, failed to properly label checks and deposit tickets, failed to maintain property or owner ledgers, failed to produce trial balances, and failed to properly reconcile the trust accounts. As a result, the firm’s rental trust account and tenant security deposit account have shortages.
DONNA B. CLONINGER (Gastonia) – By Consent, the Commission suspended the broker license of Ms. Cloninger for a period of one year effective January 1, 2018. The Commission then stayed the suspension on certain conditions. The Commission found that Ms. Cloninger, acting as qualifying broker and broker-in-charge of a real estate brokerage firm, failed to inspect properties managed by the firm which resulted in significant unnoticed damage to a client-landlord’s property; that Ms. Cloninger failed to adequately supervise unlicensed employees of the firm, one of whom engaged in the practice of real estate by signing property management agreements on behalf of the firm, and failed to maintain firm trust account funds to cover bank service fees causing the bank to draft trust money to cover the fees, thereby causing a trust account shortage. The Commission noted that Ms. Cloninger and the firm have refunded the bank service fees to the trust account.
BRADLEY B. EAGLES (Wilson) By Consent, the Commission suspended the broker license of Mr. Eagles for a period of six months effective March 1, 2018. The Commission found that Mr. Eagles failed to report within 60 days a plea conviction for misdemeanor stalking and, in conjunction with his guilty plea, admitted texting profane messages and an explicit video of himself and the victim, his ex-girlfriend, without her consent.
FAMILY REALTY INVESTMENTS LLC (Fayetteville) – By Consent, the Commission permanently revoked the firm license of Family Realty Investments effective February 14, 2018. The Commission found that Family Realty Investments through its qualifying broker and broker-in-charge failed to provide requested records to a Commission investigator during a spot inspection and, after numerous attempts to get information, admitted to converting approximately $50,000 in trust funds to its own use.
FAMILY REALTY INVESTMENTS LLC (Fayetteville) – By Consent, the Commission permanently revoked the firm license of Family Realty Investments effective February 14, 2018. The Commission found that Family Realty Investments through its qualifying broker and broker-in-charge failed to provide requested records to a Commission investigator during a spot inspection and, after numerous attempts to get information, admitted to converting approximately $50,000 in trust funds to its own use.
FIRST CLASS PROPERTY MANAGEMENT LLC (Fayetteville) – By Consent, the Commission accepted the permanent voluntary surrender of the firm license of First Class Property Management effective January 17, 2018. The Commission dismissed without prejudice allegations that First Class Property Management violated provisions of the Real Estate License Law and Commission rules. First Class Property Management neither admitted nor denied misconduct.
GASTON LAKE LIMITED (Littleton) – The Commission accepted the voluntary permanent surrender of the firm license of Gaston Lake Limited effective March 14, 2018. The Commission dismissed without prejudice allegations that Gaston Lake Limited violated provisions of the Real Estate License Law and Commission rules. Gaston Lake Limited neither admitted nor denied misconduct.
PAULA L. K. GARCIA (Fayetteville) – By Consent, the Commission accepted the permanent voluntary surrender of the broker license of Ms. Garcia effective January 17, 2018. The Commission dismissed without prejudice allegations that Ms. Garcia violated provisions of the Real Estate License Law and Commission rules. Ms. Garcia neither admitted nor denied misconduct.
SUSANNE TERESA GEE (Fayetteville) – Following a hearing, the Commission permanently revoked the broker license of Ms. Gee, effective February 2, 2018. The Commission found that Ms. Gee, while acting as broker-in-charge and qualifying broker for Pyramid Investments LLC, failed to return tenant security deposits to tenants or her landlord clients on numerous occasions, failed to provide an accounting for the tenant security deposits, failed to respond to inquiries by Commission staff, failed to provide documents requested by Commission staff, and maintained a trust account containing overdraft fees, deficit spending, and a shortage. Moreover, Ms. Gee routinely promised to deliver the outstanding security deposits to landlords or tenants with no apparent intention to do so.
GOLDEN REAL ESTATE LLC dba The Preserve at Jordan Lake Realty (Chapel Hill) – By Consent, the Commission suspended the firm license of Golden Real Estate for a period of six months effective April 1, 2018. The Commission then stayed the suspension on certain conditions. The Commission found that Golden Real Estate through its qualifying broker and broker-in-charge acted as the listing agents for lots in The Preserve at Jordan Lake, a community in Chapel Hill and entered into a “Preferred Builders Program” that requires the preferred builders to pay Golden Real Estate and qualifying broker and broker-in-charge a commission for referring a lot buyer to one of the preferred builders to build a custom home. Golden Real Estate and its qualifying broker and broker-in-charge did not disclose the referral commission program to lot buyers when the lot buyers were choosing a custom home builder.
TONY R. GOLDEN (Chapel Hill) – By Consent, the Commission suspended the broker license of Mr. Golden for a period of six months effective April 1, 2018. The Commission then stayed the suspension on certain conditions. The Commission found that Mr. Golden was the qualifying broker and the broker-in-charge of a licensed real estate brokerage firm, that Mr. Golden and the firm acted as the listing agents for lots in The Preserve at Jordan Lake, a community in Chapel Hill and entered into a “Preferred Builders Program” that requires the preferred builders to pay Mr. Golden and the firm a commission for referring a lot buyer to one of the preferred builders to build a custom home. Mr. Golden and the firm did not disclose the referral commission program to lot buyers when the lot buyers were choosing a custom home builder.
LESTER QUINTIN GRANT (Maysville) – By Consent, the Commission reprimanded Mr. Grant effective April 3, 2018. The Commission found that Mr. Grant, acting as the broker-in-charge of a licensed real estate brokerage firm, marketed a property for sale nine days prior to obtaining a fully executed listing agreement and placed a tenant in the subject property and undertook the management of the property for a period of five months without obtaining a fully executed written property management agreement from the owners, and the firm’s property ledger for the subject property failed to identify the owner and tenant, the amount and date of monies deposited, the purpose of the monies deposited, from whom deposits were received, the purpose and identity to whom disbursements were paid, and the running balance of the funds on deposit.
HALL REAL ESTATE & INS AGENCY (Fayetteville) – By Consent, the Commission suspended the firm license of Hall Real Estate & Insurance Agency for a period of 12 months effective February 1, 2018. The Commission found that Hall Real Estate & Ins Agency, through its qualifying broker and broker-in-charge, failed to maintain its trust accounts in compliance with Commission Rules, failed to properly label checks and deposit tickets, failed to maintain property or owner ledgers, failed to produce trial balances, and failed to properly reconcile the trust accounts. As a result, the firm’s rental trust account and tenant security deposit account have shortages.
JASON DUANE JORDAN (Charlotte) – By Consent, the Commission permanently revoked the broker license of Mr. Jordan effective February 14, 2018. The Commission found that Mr. Jordan, as broker-in-charge of a licensed real estate firm, performed property management services for a client and failed to provide owner statements and rental proceeds in a timely manner, failed to respond to Letters of Inquiry from the Commission, and failed to provide property management and trust account records to Commission representatives despite agreeing to do so. Subpoenaed records showed that Mr. Jordan failed to maintain trust monies in a designated trust account. Mr. Jordan failed to provide records adequate to ascertain his liabilities or to confirm proper deposit and disbursement of trust monies.
TRISTA K. JONES (Wallace) – By Consent, the Commission suspended the broker license of Ms. Jones for a period of 36 months effective February 1, 2017. Thirteen months of the suspension were active with the remainder stayed through January 31, 2020. The Commission found that Ms. Jones was the bookkeeper for a licensed real estate brokerage firm, that in a Commission random letter audit of the firm’s trust account Ms. Jones failed to provide all of the requested documentation, and that an auditor in a site visit found that Ms. Jones failed to perform reconciliations, failed to maintain a general ledger, and failed to maintain a trust account journal. Moreover, Ms. Jones could not account for all rents and security deposits received and failed to deposit all rent payments and security deposits, received in cash, into the trust account within three banking days. Ms. Jones’ broker-in-charge further admitted to spending entrusted funds on expenses, other than for which the funds were intended, which led to deficit spending and a shortage in excess of $80,000 of firm’s trust account. Ms. Jones admitted to knowing that a shortage existed in the account
L Q GRANT PROPERTIES LLC (Maysville) – By Consent, the Commission reprimanded L. Q. Grant Properties effective April 3, 2018. The Commission found that L Q Grant Properties marketed a property for sale nine days prior to obtaining a fully executed listing agreement, placed a tenant in the subject property and undertook the management of the property for a period of five months without obtaining a fully executed written property management agreement from the owners, and the firm’s property ledger for the subject property failed to identify the owner and tenant, the amount and date of monies deposited, the purpose of the monies deposited, from whom deposits were received, the purpose and identity to whom disbursements were paid, and the running balance of the funds on deposit.
ROBERT WESTON LEAROYD III (Raleigh) – By Consent, the Commission revoked the broker license of Mr. Learoyd effective March 14, 2018. The Commission found that Mr. Learoyd, in August 2010, pled guilty to a misdemeanor Operating Personal Watercraft with Child without a Life Jacket in Carteret County; that in August 2014, Mr. Learoyd pled guilty to a misdemeanor Operating a Boat in a Reckless Manner in Carteret County; that in June 2016, Mr. Learoyd pled guilty to two counts of Trafficking in MDA/MDMA, one count of Maintain Vehicle, Dwelling, or Other Place for Use, Storage, or Sale of a Controlled Substance, and five counts of Possession/Distribution of a Precursor Chemical in Wake County and was sentenced to four terms of 6-17 months in prison to be served one after the other and ordered to pay $25,352.50; and that Mr. Learoyd failed to report any of these convictions to the Commission.
MOUNTAIN MANAGER & ASSOCIATES INC (Hiawassee, Georgia) – By Consent, the Commission accepted the voluntary surrender of the firm license of Mountain Manager & Associates for a period of 10 years effective January 17, 2018. The Commission dismissed without prejudice allegations that Mountain Manager & Associates violated provisions of the Real Estate License Law and Commission rules. Mountain Manager & Associates neither admitted nor denied misconduct.
NOBLE LLC (Huntersville) – By Consent, the Commission reprimanded Noble LLC effective April 1, 2018. The Commission found that Noble failed to enter into buyer agency agreements in any of its sales transactions and failed to have clients sign the Working with Real Estate Agents brochures.
JOHN F. PINTER (Tuskasegee) – By Consent, the Commission suspended the broker license of Mr. Pinter for a period of two years effective November 15, 2017. The Commission then stayed the suspension effective February 15, 2018 on condition that Mr. Pinter is ineligible to become or act as a broker-in-charge for a period of three years. The Commission found that Mr. Pinter failed to adequately execute his responsibilities as a broker-in-charge and failed to actively supervise a provisional broker affiliated with the firm and its unlicensed employees. The Commission also found that Mr. Pinter operated a firm under an assumed name without notifying the Commission, operated a branch office without designating a separate broker-in-charge; deposited rent monies and other entrusted funds in a trust account located in a Texas bank; failed to adequately review the trust account records, to ensure that all agency agreements complied with Commission Rule, or ensure that trust money was deposited in a reasonable amount of time; and allowed unlicensed individuals and business entities to be paid commissions. An audit conducted by the Commission determined that no money was missing from Mr. Pinter’s firm’s trust account, and it does not appear that any consumers have been harmed.
JOSE MANUEL POMALES (Fayetteville) – By Consent, the Commission permanently revoked the broker license of Mr. Pomales effective February 14, 2018. The Commission found that Mr. Pomales, acting as qualifying broker and broker-in-charge of a licensed real estate firm, failed to provide requested records to a Commission investigator during a spot inspection and, after numerous attempts to obtain information from him, admitted to converting approximately $50,000 in trust funds to his own use.
AMY J. POMERANTZ (Chapel Hill) – By Consent, the Commission reprimanded Ms. Pomerantz effective February 14, 2018. The Commission found that Ms. Pomerantz listed a property in the MLS with a square footage measurement of 4,807 square feet provided by an appraiser she hired; then received a 2013 appraisal from her seller client and changed the square footage in the MLS listing to 5,272 square feet, a difference of approximately nine percent. Another appraiser measured the property for the buyer as having 4,849 square feet and the buyer asked for and negotiated a price reduction before the buyer closed on the property.
DEANNA MARIE PORTER (Raleigh) – By Consent, the Commission revoked the provisional broker license of Ms. Porter effective March 14, 2018. The Commission found that Ms. Porter, as a provisional broker, regularly performed real estate brokerage without the supervision of her broker-in-charge; and along with her now deceased husband, an unlicensed employee of the firm, managed the day-to-day operations of the firm; and that Ms. Porter’s husband converted approximately $128,000 in trust funds to their own use including transferring funds to their joint and personal accounts, and paying rent on their residence.
PYRAMID INVESTMENTS LLC (Fayetteville) – Following a hearing, the Commission permanently revoked the firm license of Pyramid Investments, effective February 2, 2018. The Commission found that the broker-in-charge and qualifying broker for Pyramid Investments, failed to return tenant security deposits to tenants or her landlord clients on numerous occasions, failed to provide an accounting for the tenant security deposits, failed to respond to inquiries by Commission staff, failed to provide documents requested by Commission staff, and maintained a trust account containing overdraft fees, deficit spending, and a shortage. Moreover, the broker-in-charge routinely promised to deliver the outstanding security deposits to landlords or tenants with no apparent intention to do so.
JAMES WESLEY RUSSELL (Cartersville, Georgia) – By Consent, the Commission accepted the voluntary surrender of the broker license of Mr. Russell for a period of 10 years effective January 17, 2018. The Commission dismissed without prejudice allegations that Mr. Russell violated provisions of the Real Estate License Law and Commission rules. Mr. Russell neither admitted nor denied misconduct.
SRP MANAGEMENT (Gastonia) – By Consent, the Commission suspended the firm license of SRP Management for a period of one year effective January 1, 2018. The Commission then stayed the suspension on certain conditions. The Commission found that SRP Management through its qualifying broker and broker-in-charge failed to inspect properties managed by the firm that resulted in significant unnoticed damage to a client-landlord’s property; that the broker-in-charge failed to adequately supervise unlicensed employees of the firm, one of whom signed property management agreements on behalf of the firm, and failed to maintain funds to cover bank service fees causing the bank to draft trust money to cover the fees, thereby causing a trust account shortage. The Commission noted that the broker-in-charge and the firm have refunded the bank service fees to the trust account.
TRIAD REALTY PROS LLC (Greensboro) – By Consent, the Commission permanently revoked the firm license of Triad Realty Pros effective April 11, 2018.The Commission found that Triad Realty Pros worked closely with a property management firm which it often paid through its operating account. The property management firm’s license was previously revoked by the Commission due to its unlicensed owner having signature authority over the accounts, among other things, in violation of its probation sanction. An audit of Triad Realty Pros’ trust accounts 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 in excess of $17,000. Multiple checks were being cashed by an unlicensed assistant who also had signature authority for Triad Realty Pros’ accounts.
URBAN HOMES REALTY AND MANAGEMENT LLC (Charlotte) – By Consent, the Commission permanently revoked the firm license of Urban Homes Realty and Management effective February 14, 2018. The Commission found that Urban Homes Realty and Management through its broker-in-charge performed property management services for a client and failed to provide owner statements and rental proceeds in a timely manner, failed to respond to Letters of Inquiry and failed to provide property management and trust account records to Commission representatives despite the agreement of its broker-in-charge to do so. Subpoenaed records showed that the firm failed to maintain trust monies in a designated trust account. Urban Homes Realty and Management failed to provide records adequate to ascertain its liabilities or to confirm proper deposit and disbursement of trust monies.
VIJAY KRISHNA MOHAN VULLI (Huntersville) – By Consent, the Commission reprimanded Mr. Vulli effective April 1, 2018. The Commission found that Mr. Vulli acted as the qualifying broker and broker-in-charge of a licensed real estate brokerage firm, that Mr. Vulli failed to enter into buyer agency agreements in any of its sales transactions, and failed to have clients sign the Working with Real Estate Agents brochures.
QING WANG (Cary) – By Consent, the Commission suspended the broker license of Ms. Wang for a period of 10 months effective April 11, 2018. The Commission then stayed the suspension for a probationary period from April 11, 2018 through February 10, 2019. The Commission found that Ms. Wang reported her Level 1 DWI conviction to the Commission 82 days after receiving the final judgement. Ms. Wang received 18 months of supervised probation, completed a substance abuse assessment, and surrendered her driver license.
DAVID MATTHEU WOOLARD (Jacksonville) – By Consent, the Commission suspended the broker license of Mr. Woolard for a period of six months effective March 15, 2018. The Commission then stayed the suspension for a probationary period of six months. The Commission found that Mr. Woolard timely reported a July 6, 2017 plea conviction for misdemeanor possession of drug paraphernalia stemming from a January 2013 arrest, that Mr. Woolard reported five misdemeanor convictions on his 2010 broker license application, and that the conviction is Mr. Woolard’s second possession of drug paraphernalia conviction.
This article came from the May 2018-Vol49-1 edition of the bulletin.
The Commission approved topics for the 2018-19 General Update and BIC Update Courses.
Material Fact Issues
Contract Issues
Earnest Money Deposits
Agency Issues
Listing Agency Responsibilities
Subagency
Unlicensed Activity
of Unlicensed Assistants in
License Law and Rules Update
Additional topics to be addressed in the BIC Update Course will include (1) Satellite/Branch Offices; (2) BIC Best Practices; and (3) Escrow Account Reconciliation with emphasis on related property management and commingling issues.
As to all topics except the “Law and Rules Update,” the materials will focus on case studies.
This article came from the February 2018-Vol48-3 edition of the bulletin.
By Corean E. Hamlin, Director, Education and Licensing Division
Effective January 1, 2018, as required by the NC state legislature in NCGS § 143-765, all applicants for occupational licenses, permits, and certifications must disclose any investigations for employee misclassification.
Due to the new requirement, every licensee will be required to complete the renewal process individually. Brokers-in-Charge will not be able to renew the licenses of affiliated brokers.
All North Carolina Real Estate Commission applications — including broker, firm, limited nonresident commercial, and private school licenses, temporary practice permits, and timeshare registrations — have been updated to be in compliance with the new law.
All applicants must certify that they have read and understand a Public Notice Statement from the Employee Classification Section of the State Industrial Commission (http://www.ic.nc.gov/121317ECSPublicNotice.pdf) and must disclose any investigations for employee misclassification.
If an applicant does not provide the certification and disclosure, the NC Real Estate Commission is not permitted to process the application. Contact information for questions and inquiries is provided on the Public Notice Statement.
NCGS § 143-765 applies to applications for and renewals of all occupational licenses, permits, and certifications, so the certification and disclosure statements will be required during the license renewal process, which occurs annually between May 15 and June 30.
This article came from the February 2018-Vol48-3 edition of the bulletin.
Following is a summary of the proposed rule amendments the Commission approved for publication in the North Carolina Register at its December 2017 meeting. The text for the proposed rule amendments under consideration may be found on the Commission’s website under ‘License Law and Rule Changes.’ Members of the public may submit oral or written comments on any proposed rule(s) by contacting Melissa Vuotto, Rulemaking Coordinator. If approved, the proposed rules will have an effective date of July 1, 2018.
Section A .0100 General Brokerage
21 NCAC 58A .0105 Advertising – To amend the rule in paragraph (a)(1) to clarify that a broker must include the name of the broker and the firm or sole proprietorship with which the broker is affiliated.
21 NCAC 58A .0106 Delivery of Instruments – To amend the rule in paragraph (a) to require every broker to deliver a copy of any written instrument to their customer or client within 3 days of the document’s execution.
21 NCAC 58A .0108 Retention of Records –To amend the rule to include a broker’s duty to protect the security/confidentiality of consumer data in the broker’s possession, including secure email, encryption, etc. and to require brokers to provide a copy of all transaction files to their firm within three days of receipt.
21 NCAC 58A .0110 Broker-in-Charge – To amend the rule to (1) clarify the rule text; (2) remove the North Carolina GRI program as an exception to the Broker-in-Charge experience requirement; and (3) require nonresident brokers to complete the 12-hour BIC Course and BIC Update Course.
21 NCAC 58A .0114 Residential Property and Owner’s Association Disclosure Statement – To amend the rule to (1) change “Purchaser” to “Buyer” (the purpose of this change is to make the rule match the word usage commonly used by brokers), (2) include a question that asks if a radon mitigation system is present in the home and to clarify whether the dwelling’s sewage disposal system is permitted by the State, and (3) separate the issue of deed restrictions and Property Owners Associations, since not all properties with deed restrictions are governed by a Property Owners Association and to include “Master Insurance” under services and amenities of a owners’ association.
Section A .0500 Licensing
21 NCAC 58A .0503 License Renewal – To amend the rule to remove the sentence that states a broker can renew by calling the Commission’s offices in order to safeguard credit card information. The Commission no longer accepts payments over the telephone.
21 NCAC 58A .0505 Reinstatement – To amend the rule in paragraph (a) to remove the fee associated with suspended licenses, in paragraph (b) to add language clarifying that criminal background checks will be conducted pursuant to a reinstatement application, and to amend the rule to require persons requesting reinstatement after less than six months from expiration to disclose any criminal convictions or disciplinary actions by other occupational licensing boards, including any such offenses that occurred since the person’s license expired or was revoked.
21 NCAC 58A .0511 Licensing of Persons Licensed in Another Jurisdiction – To amend the rule to include provisions for licensing military-trained applicants and their military spouses with temporary practice permits in compliance with G.S. 93B-15.1, as enacted in Section 3 of S.L. 2017-28.
Section A .1700 Mandatory Continuing Education
21 NCAC 58A .1702 Continuing Education Requirement – To amend the rule to clarify continuing education credit for a broker-in-charge or broker taking the General Update Course. This provision was previously located in 21 NCAC 58A .0110.
21 NCAC 58A .1703 Continuing Education for License Activation – To amend the rule to require brokers on inactive status for more than two years to complete additional education prior to activating their license.
21 NCAC 58A .1711 Continuing Education Required of Nonresident Licensees – To amend the rule to eliminate the requirement of nonresident brokers to notify the Commission of affiliation with a North Carolina office.
Section B .0100 Time Share Project Registration
21 NCAC 58B .0103 Renewal of Time Share Registration – To amend the rule to eliminate the notary requirement on the renewal form in order to proceed with electronic time share renewals.
Section G .0100 Real Estate Education – General
21 NCAC 58G .0103 Definitions – To amend the rule to include additional definitions of terms.
Section H .0200 Real Estate Schools
21 NCAC 58H .0211 Prelicensing and Postlicensing Roster Reporting – To amend the rule to require schools to submit a Roster Report electronically within 7 days following the course, instead of 30 days.
Section H .0400 Approved Instructors
21 NCAC 58H .0404 Renewal of Sponsor Approval – To amend the rule to change a rule reference.
This article came from the February 2018-Vol48-3 edition of the bulletin.
The following article is copyrighted and reprinted with the permission of NC REALTORS®.
A REALTOR’S® purpose is to help clients find a home, a safe haven for their families and loved ones. So, what happens when hackers strike and completely rob that family of their security and dream?
Picture this scenario…a young couple, so excited about closing on their first home, one they saved for years to purchase. Throughout the process, they worked with a REALTOR®, and thought nothing of it when they received an email from this REALTOR® requesting they change the wiring instructions to a different account with the closing attorney. Little did they know this email was a scam. In an instant, all of their hard-earned savings was gone…all of it. Without the available funds, the couple is unable to move into their new home, and with no other existing residence under contract, faces the future with no place to call home and no way to pay for alternate housing.
This situation is based upon hundreds of similar accounts across the United States, resulting in tens of millions of dollars being directed to international criminal organizations. These scammers are smart, sophisticated and their methods are constantly evolving.
History in NC
Reports of wire scams surfaced in North Carolina beginning in 2015, but over the last two years several dozen instances have been reported. The money stolen in those instances includes both incoming funds necessary to complete a home purchase and the net proceeds due to sellers. Additionally, there have been instances of loan payoffs being diverted. In an effort to educate the real property bar to the risks and available preventative efforts to protect home buyers and sellers, Lawyers Mutual, the NC State Bar, various title insurers and their agencies produced numerous alerts, articles, continuing education seminars and videos. However, the instances of fraud continue to increase, with more reported events in the first five months of 2017 than in 2015 and 2016 combined.
Real estate professionals rely on technology for instant and remote communication and the ability to close back-to-back transactions, including sending and receiving wires. It is also no longer practical for closing attorneys to deposit checks and wait for the funds to clear the Federal Reserve banking system. Because of this, professionals must work diligently to avoid being the source of a compromise.
Additionally, real estate professionals must educate clients to the risks presented in sending and receiving wires. Unfortunately, clients are the parties most likely to be inconvenienced by new preventative measures, at what is admittedly an already hectic and stressful time. Here are a few important recommendations to communicate to your clients:
If all sellers are unable to attend the ceremony, it is recommended that wiring instructions be included in the same package as the deed, lien waiver and other original closing documents. Also utilize a signed and notarized seller wiring directive, if possible. But even then, the closing attorney should attempt to verify the instructions over the telephone directly with the seller. Reminding your seller client that such a call will likely be necessary can avoid additional delay in disbursement of funds. Email verification alone is inadequate.
Closing attorneys will not change wiring instructions during the course of an individual closing except under the most extreme of circumstances. Should sellers legitimately need to change wiring instructions themselves, they should understand this will be considered a major red flag to the closing attorney and extensive verification will be required. Insureds are advised not to accept changes to wiring instructions and to only transmit a check when instructions change.
Again, the confirmation of transmission telephone call should be made using contact information directly from the attorneys’ website and not the email or fax containing the wiring instructions.
Here are a few recommendations for all real estate professionals to adopt:
While additional security procedures are encouraged beyond the scope of this article, those listed above are free and easy to implement. Users with even minimal technical knowledge should be able to apply these measures to day-to-day business operations. For even more protection, consult an IT professional to ensure security measures are up to industry standards.
So, how do they do it?
This article came from the February 2018-Vol48-3 edition of the bulletin.
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.
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.
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.
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.
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.
This article came from the February 2018-Vol48-3 edition of the bulletin.
By Charlie Moody, Assistant Director, Regulatory Affairs Division
In a recent case, Commission staff received two complaints against a qualifying broker/broker-in-charge and his two firms.
The first complaint was related to the failure of the broker to withdraw a listing upon request of the client and the failure of the broker to deliver a copy of the executed listing agreement to his client.
This seemed like a relatively minor situation and even the complaining witness expressed his wish to withdraw the complaint once it had the desired effect, which was to get the broker to remove the property from the MLS.
However, the second complaint came in with yet another client alleging that the broker had failed to provide him with a copy of the executed listing agreement. That second complaint created the appearance of a pattern.
Also, the second complaint alleged that the broker rented the client’s property and failed to provide the client with a copy of the lease and even more importantly failed to turn over trust funds to the owner-client. Interviews of the broker, tenant and other witnesses were conducted and documentation collected by an investigator.
The broker’s transaction file for the first client contained only an MLS printout and the signed listing agreement. The broker could produce only an incomplete and unsigned listing agreement for the second transaction. Even the tenant didn’t get a copy of the signed lease from the broker.
The first page of the lease agreement, which the tenant was able to produce, named the wrong firm as the property manager. The named firm was licensed, with the broker designated as the qualifying broker, but there was no designated broker-in-charge, making the firm ineligible to conduct sales or property management.
The broker’s excuse was that this was just a mistake and the named firm was not conducting brokerage. In fact, the investigator discovered the firm was actually conducting property management out of a separate office and the broker had two trust accounts as well as property management agreements and leases in place and signed by the broker.
The broker also gave conflicting information about what he had done with the tenant security deposit and first months’ rent, and had no documentary evidence to show the investigator where the money went. The broker expressed much confusion and lack of memory about many of these events. The Commission permanently revoked all three licenses.
Lessons learned?
If you agree to be qualifying broker of a firm, you are responsible for ensuring that the firm has a broker-in-charge before doing any brokerage activity. If you conduct brokerage activity, deliver agency agreements to your clients and maintain a complete transaction file including the Working With Real Estate Agents brochure. If you collect funds, deposit those funds in a trust account and document receipt and disbursement. Documentation may also help when your memory doesn’t.
This article came from the February 2018-Vol48-3 edition of the bulletin.