2015 General Update, BICUP Topics

Topics for the General Update and Broker-in-Charge Update (BICUP) Courses are as follows:

General Update: RESPA/HUD-1 changes, revisions to the Vacation Rental Act, Safety Update, Mineral and Oil and Gas Disclosure, Commission Rule and NCAR Forms update, and Licensing and Education Issues.

Broker-in-Charge Update (BICUP): All of the General Update Course topics, plus How to Handle Complaints and a review of Rule A.0116, Trust Money Handling Procedures, but not record-keeping requirements.

All non-BIC licensees must take the four-hour General Update Course and a four-hour elective course between July 1 and June 10 each licensing year after first license renewal and prior to second renewal.

Brokers who are acting as a broker-in-charge or who are broker-in-charge eligible (i.e., previously declared as BIC and satisfied both qualification requirements, but later stepped down) must take the BICUP Course plus one four-hour elective course between July 1-June 10 each licensing year. The BICUP Course will satisfy the broker’s Update Course requirement, and maintain broker-in-charge eligibility.

This article came from the May 2015-Vol46-1 edition of the bulletin.

Inspections: Varied Tests, Verifications, Property Evaluations Offer Many Choices for Prospective Homebuyers

By Stephen L. Fussell, Senior Consumer Protection Officer

The following is a list of inspections and verification measures that a prospective homebuyer should consider. Some lenders require certain inspections. However, even if a lender does not require a particular inspection or test, buyers should consider the following in order to protect their long-term interests. Declining an inspection in an effort to save money may cost the buyer much more than the cost of the inspection in the long run. This list is not exhaustive, but is intended to cover the most common inspections and verifications utilized by buyers.

Home Inspection –This is a general overview of the condition of a house. It is a visual inspection and is not exhaustive (i.e. it may not detect hidden defects). It does not provide a guarantee that defects will not arise in the future. Even buyers of newly-constructed homes should have home inspections. A residential home inspector must be licensed. Buyers should pay close attention to any recommendation by a home inspector for further, specialized inspections.

Wood-destroying insects – Every house should be inspected for insects that eat wood because the presence of such insects can damage or destroy a house. Evidence of a previous infestation of wood-destroying insects may warrant an inspection by a general contractor or structural engineer to determine the extent of the damage.

Radon – This is a colorless, odorless, carcinogenic gas that rises through the soil and enters a house through the crawl space or concrete slab. There are several methods for testing for the presence of radon. The EPA has indicated that corrective action is necessary when the radon level inside a home is 4.0 pCi/L or higher as this can be harmful to one’s health. Every buyer should consider having a radon test.

Survey – This will indicate whether there are any encroachments (e.g. fences, buildings, driveways, landscaping, etc.) by the subject property or adjacent properties.

Lead – Lead-based paint and lead pipes are the primary source of lead in homes. If a home was built before 1978, the seller must provide a lead-based paint disclosure. If a buyer has children, it may be wise to test the property for the presence of lead.

Mold – While mold is found everywhere and most types of mold are harmless, some types carry health risks. Also, persons with asthma and other respiratory health issues may be more sensitive to mold than the general population. If there is evidence of significant mold or if the buyer expresses a sensitivity to mold, an inspection by a qualified mold inspector would be wise.

Gas furnace – If the heat exchanger in the gas furnace is cracked, the furnace may produce carbon monoxide which can be fatal. A gas furnace should be inspected by a licensed HVAC firm.

Fireplace/Chimney – Fireplaces and chimneys should be inspected for cracks, creosote build-up and/or weak foundations that may allow the chimneys to lean away from the house creating gaps that enable moisture and pests to enter the gaps and the house. Also, don’t forget to inspect flues for gas stoves and gas logs.

Moisture (crawl space, basement, roof leak, plumbing leak) – Moisture is a home’s worst enemy. It promotes wood decay, mold and wood-destroying insects. Any evidence of moisture in a crawlspace or basement or stains on ceilings should lead to further examination.

Foundation cracks – This can be a sign of structural weakness caused by uneven settling of the soil under the house. The buyer should consider hiring a structural engineer to evaluate suspicious foundation cracks.

Septic systems – Check the septic permit for the specified number of bedrooms to make sure it meets or exceeds the advertised number of bedrooms and to locate the septic system on the property. If the area in which the septic system is located is wet or smells like sewage, the buyer should contact either the county environmental health department or a septic contractor to evaluate.

Wells – Test for contamination by bacteria, heavy metals, pesticides and other toxins. Drinking water containing any of these could be harmful to one’s health. A buyer or buyer’s agent may look at the water (Is it clear or brown?) and taste the water to help make the decision on how extensively to test the well water.

Underground fuel tanks – If a property depends upon well water and it has or previously had an underground fuel storage tank, it will be very important to determine whether there was any leakage from the tank. An unused tank should be removed or filled with sand to prevent collapse and the soil around the tank should be tested for fuel contamination.

City water/sewer – If a property is advertised as having “city water/sewer,” it would be wise to contact the local utility provider(s) to confirm that the property is connected to city water and sewer services.

Fire – If there is information or evidence indicating that a fire occurred, the buyer should hire a structural engineer to evaluate the structural integrity of the house.

Cracked concrete slabs, driveways, patios – If a house is built on a concrete slab (instead of a crawl space) and the slab is cracked, a buyer should consider hiring a structural engineer to evaluate the crack. Minor cracks in driveways, sidewalks and patios are normal. However, if a crack appears to be wide or uneven in elevation, the buyer should consider hiring a structural engineer to evaluate.

Flooding issues – Is the property in a designated flood plain? If so, the lender may require flood insurance. If the property is not located in a flood plain, but is located near a drainage ditch or a body of water or, if the ground around the house slopes downward toward the house causing surface water to drain toward the house, then there could be a flooding or moisture issue that should be examined.

Homeowners’ Association – Does an HOA exist? If so, who controls it, what is its financial condition, how much are the dues and what exactly do the dues cover?

Area – Prospective buyers and their agents should drive around the area, speak with neighbors, and check websites containing local information to identify potential problems regarding the property, neighborhood and general area.

Previous service/repair – If the seller or seller’s agent indicates that something was serviced or repaired, it may be wise for the buyer to closely inspect the item to assure that it is in good working order and not in need of further service/repair.

Building permit – If a room has been added to the house or if a previously unfinished area was finished or if a new deck was constructed, a buyer would be wise to contact the county building inspection department to confirm that a building permit was obtained. The issuance of a permit ensures that the construction was done properly and approved by the county.

While all of the items in this list may not apply to every transaction, they provide a reasonable guide for prospective buyers and their agents to complete their due diligence and to help buyers determine whether to complete their purchases.

This article came from the May 2015-Vol46-1 edition of the bulletin.

65 Years of Service to the Commission

Five members of the Commission staff received awards for service recently. Commission Chairman Thomas R. Lawing, Jr., (left) and Vice Chair L. S. “Cindy” Chandler (right) presented the awards to (l. to r.) Curtis E. Aldendifer, Associate Legal Counsel, five years; Pui “Peggy” Y. Chow, Accounting Technician, 15 years; Wendy C. Harper, Office/Human Resources Manager, 25 years; Patricia A. Moylan, Legal Education Officer, 15 years; and D. Scott Schiller, Financial Fraud Investigator, five years.

This article came from the May 2015-Vol46-1 edition of the bulletin.

Paula Ricard Named Chief Financial Officer

Paula L. Ricard has been named Chief Financial Officer. She was formerly Financial Officer. With the Commission since 1990, she holds an MBA from Meredith College and is a Certified Public Accountant.

This article came from the May 2015-Vol46-1 edition of the bulletin.

Make Safety the First Order of Business

By Corean E. Hamlin, Education/Licensing Officer, and Pamela R. Rorie, Continuing Education Officer

Viewing vacant properties, going on listing appointments, hosting open houses…if you are a real estate professional, you undoubtedly perform these tasks routinely. However, these everyday situations have the potential to put brokers in danger, susceptible to becoming victims of violent crimes.

Research involving survivors of violent crimes indicates that taking protective steps to stay safe can lessen your chances of being attacked. Don’t be a crime statistic. Use the following tips and make personal safety your first priority.

Be suspicious. Take steps to get to know your prospects and customers when meeting them for the first time. Perform name searches through search engines and social networking websites. Insist that new prospects meet you at your office, provide identification, and complete information forms.

Tell someone and then stay in touch. Before showing property, give a co-worker or peer your itinerary, including your estimated return time and the names of your customers/clients. Ask someone to call you at a pre-determined time to check on you. Avoid showing property after dark.

Have a fully charged cell phone and have it readily available – not in your purse or pocket. Program “911” and other emergency numbers into speed dial. Consider using a safety mobile app on your smartphone; several are available – some created especially for real estate brokers – and can do everything from instantly alerting others to accessing your GPS coordinates to requesting help.

Have a pre-determined distress code. Create a distress code within your office and make sure that all brokers and staff members know it. Using a prearranged distress code, a broker can alert another office member that s/he is feeling uneasy with a client/customer (without letting the client/customer know). If a broker calls another office member and gives the distress code, that office member knows that the broker needs immediate assistance. One suggestion is to use an acronym for “help;” for example: “Have Elizabeth Leave the Papers.”

Implement a buddy system. Predators thrive on isolation, so team up with another broker whenever possible. Working in pairs will lessen the chance of attack.

Practice vehicle safety. Make sure your car is in good working order and keep your keys readily available. When parking, take stock of your surroundings and avoid areas where you could be blocked in. When showing property to a new prospect (stranger), ask the prospect to follow you in his/her own car. If you must ride together, you should drive.

Dress for safety and success. Dress professionally. Don’t wear expensive jewelry as it may make you a target. Wear shoes that won’t hinder your ability to run, kick, or fight back.

Walk behind. Encourage prospective buyers to walk ahead of you when you’re showing property. Be aware of possible escape routes, and be wary of attics and basements.

Conduct safe personal marketing and be careful how you use social media. Keep your photos strictly professional – avoid “glamour shots.” Limit the amount of personal information you share. Make sure to control the privacy settings in your social media accounts, including the geolocation features. Many social networking sites will share your precise location with others unless you disable that feature.

Plan for a safe open house. Prior to an open house, introduce yourself to the neighbors. Evaluate the property and identify vulnerable points. Avoid advertising the property as “vacant”. On the day of the open house, keep your cell phone with you and check in with your office routinely. Ask another broker to join you for the event.

Trust your instincts. If you feel apprehensive or have the sense that something isn’t quite right, trust your gut!

Know your options and how you’ll respond to save your life. No resistance may be the best choice in some situations. If a would-be robber confronts you with a lethal weapon, give up your property. However, if you’re in a situation in which you must defend yourself, scream and fight back. Consider taking a course to learn self-defense techniques and skills.

All of these and many more tips are available in the North Carolina Real Estate Safety Guide, which was created in association with the NC Association of REALTORS®.

Special thanks to the Washington Real Estate Safety Council for allowing NCREC to use their Personal Safety Guide as the basis for development of the North Carolina Real Estate Agent Safety Guide.

To view or order the brochure, visit the Commission’s website, www.ncrec.gov. For more real estate agent safety resources, visit the North Carolina Association of REALTORS® website (www.ncrealtors.org) and National Association of REALTORS® website (www.realtor.org).

This article came from the May 2015-Vol46-1 edition of the bulletin.

Robert Ramseur Appointed to Commission

Robert J. Ramseur, Jr., of Raleigh, has been appointed to the North Carolina Real Estate Commission by Governor Pat McCrory, announced Miriam J. Baer, Executive Director of the Commission.

Ramseur is a partner at the law firm of Ragsdale Liggett PLLC and chair of its real estate department. His practice focuses on residential and commercial real estate transactions, real estate financing and development, tax and entity structuring, lease negotiations and drafting and real estate litigation.

Licensed to practice law in North Carolina in 1996, Ramseur formed his own firm in 1997 and merged his practice with Ragsdale Liggett in 2001. He is licensed to practice in all state courts in North Carolina, the District Court of the United States (Eastern District of North Carolina), and the U.S. Supreme Court.

He is past president of the Wake County Real Property Lawyers Association, past co-chair of the Joint Forms Task Force for the North Carolina Bar Association and North Carolina Association of REALTORS^®, and past president of the Real Estate Lawyers Association of North Carolina, Inc., a trade association with over 350 members.

A native of Raleigh, Ramseur graduated with honors from Needham B. Broughton High School and received a Bachelor of Arts in History, cum laude, from Wake Forest University in 1992 and a law degree from Wake Forest in 1995.

Active in civic and charitable activities, he is a past president of the Rotary Club of the Capital City and the Board of Directors of Raleigh’s Theatre In The Park and participates each year as a fund raising volunteer for the Triangle Area YMCA.

This article came from the May 2015-Vol46-1 edition of the bulletin.

License Renewal Period Opens May 15; All Licensees Must Renew Online

Reminder notices to renew your real estate license will arrive by email, if you receive your Real Estate Bulletin by email, or in your postal mailbox, if you receive the printed edition. Either way, you must renew your license between May 15 and June 30 to avoid notification in early July that you no longer have a license, as it is expired.

This year, the law requires that you renew online through the Commission’s website, www.ncrec.gov. (A broker who does not have the ability to renew online may renew by calling the Commission’s office between 8:30 a.m. and 5:00 p.m., Monday through Friday (919/875-3700)).

Log in to your personal record using your personal identification number (PIN) on or after May 15 to complete the process. Your PIN will be the last four digits of your Social Security number unless you have changed it.

The license renewal fee is $45. When paying online, you may use Visa, MasterCard, or Discover Card. A confirmation of renewal to print will appear on your screen when the process is completed.

Review your email address or addresses while logged in. Real Estate License Law allows you to designate your email address in one of two ways: (1) PRIVATE, meaning it will not be disseminated to anyone and will be used exclusively for communication from the Commission to you; or (2) PUBLIC, meaning it will be provided upon request to the public, including CE course sponsors and others. You may provide both a private and/or public email address upon logging into your record.

All broker license records are updated on July 1 to reflect license status as of that date. If your renewal fee has not reached the Commission by June 30, your license will be expired as of July 1. (Because of the records updating procedure and annual maintenance, the Commission’s website typically is down on July 1 and 2.)

To reinstate an expired license, you must pay a $55 fee between July 1 and December 31. Failure to reinstate the former license by December 31 will result in your having to file a new application and fee, and obtain a criminal background report. You will also be required to take additional education and/or pass the state license examination.

Even if you miss your continuing education, you may still renew and thus keep your license. The deadline for CE is June 10; if incomplete after that date, your license will be renewed on “inactive” status so long as the renewal fee is timely paid.

Brokers who are brokers-in-charge or brokers-in-charge eligible must take the Broker-in-Charge Update Course and one elective by June 10. Failure to take the correct CE or timely renew the license will result in loss of your BIC eligibility. Brokers-in-charge who lose BIC status or eligibility must (1) return the license to active status; (2) meet the experience requirements for designation; (3) take the 12-hour Broker-in-Charge Course before re-designation; and (4) send the Commission the BIC Declaration Form. Do NOT take the 12-hour BIC Course before your license is on active status!

Brokers-in-charge are also responsible for ensuring that licensees under their supervision have renewed their licenses and completed their continuing education and postlicensing education, if applicable, to maintain an active license, i.e., one they may use.

This article came from the May 2015-Vol46-1 edition of the bulletin.

Disciplinary Actions – May 2015-V46-1

WILLIAM IRWIN BELK (Charlotte) – Following a hearing, the Commission reprimanded Mr. Belk effective March 3, 2015. The Commission found that Mr. Belk’s North Carolina law license was suspended by the North Carolina State Bar (NCSB) for three years effective November 1, 2013; that Mr. Belk had been reprimanded by the NCSB in July 2012; and that Mr. Belk failed to report either disciplinary action by the NCSB within 60 days as required by Commission rules.

CATHERINE L. BLUM (Wilmington) – By Consent, the Commission suspended the broker license of Ms. Blum for a period of one month effective April 1, 2015. The Commission found from October 28, 2013, to May 2014, Ms. Blum, as a provisional broker, conducted brokerage activities outside of the supervision of a broker-in-charge; and that from March 10, 2014, to March 31, 2014, Ms. Blum’s license was designated as inactive and Ms. Blum continued to practice real estate brokerage with an inactive license.

BROWNING REALTY, INC. (Garner) – By Consent, the Commission reprimanded Browning Realty effective March 1, 2015. The Commission found that Browning Realty, acting as a listing firm, failed to disclose that a major highway expansion would affect the firm’s listed property; that the buyer attended a public hearing after closing on the listed property and was informed that, depending upon the chosen route, the buyer’s property would either be taken by the State of North Carolina or be within 0.5 mile of the highway. The firm refunded its commission to the buyer.

MARTHA ELIZABETH CONAWAY (Iron Station) – By Consent, the Commission reprimanded Ms. Conaway effective June 1, 2015. The Commission found that in October 2014, Ms. Conaway self-reported two criminal convictions for the sale of a schedule III controlled substance that occurred in 2011; that Ms. Conaway was ordered to pay a fine of $1,220, was given a suspended jail sentence of five to 15 months and put on 18 months of supervised probation, which can be commuted to unsupervised probation after 6 months.

CHRISTOPHER BRIAN CORBETT (Greenville) – By Consent, the Commission suspended the broker license of Mr. Corbett for a period of 12 months effective March 1, 2015. Four months of the suspension is active with the remainder stayed for a probationary period ending March 1, 2016. The Commission found that Mr. Corbett, acting as qualifying broker and broker-in-charge of a property management firm, charged fees and marked up the cost of repair work without disclosing these charges to property owners; that Mr. Corbett paid referral fees directly to provisional brokers; that Mr. Corbett failed to keep trust account records in accordance with Commission Rules and did not properly maintain the firm’s rental trust accounts resulting in shortfalls of as great as $19,988.09; and that, in 2013 and 2014, the firm’s rental trust account was charged insufficient fund fees and other bank fees totaling $750, which were not reimbursed.

COX INVESTMENTS, INC. (Holden Beach) – By Consent, the Commission suspended the firm license of Cox Investments, Inc., for a period of two years effective February 1, 2015. The Commission then stayed the suspension for a probationary period ending February 1, 2017. The Commission found that Cox Investments’ broker-in-charge failed to properly supervise its bookkeeper; that due to the failure to properly supervise the bookkeeper, Cox Investments’ rental trust accounts had a possible short fall of $12,999.14; that Cox Investments co-mingled rental income from properties it owned with funds held in trust for clients and customers; that Cox Investments’ vacation rental agreements included improper fees, improper terms for forfeiture of tenant security deposits, and failed to include a description of rights and responsibilities in the event of a mandatory evacuation; that Cox Investments’ property management agreements did not conspicuously disclose that trust funds would be deposited in an interest-bearing account and failed to include the license number of the broker signing on behalf of Cox Investments. The Commission noted that Cox Investments has since replaced its Qualifying Broker and Broker-in-Charge.

STEVEN C. COX (Holden Beach) – By Consent, the Commission suspended the broker license of Mr. Cox for a period of two years effective February 1, 2015. Nine months are active with the remainder stayed for a probationary period ending February 1, 2017. The Commission found that Mr. Cox, acting as broker-in-charge of a real estate brokerage firm, failed to properly supervise its bookkeeper; that due to Mr. Cox’s failure to properly supervise the bookkeeper, the firm’s rental trust accounts had a possible short fall of $12,999.14; that Mr. Cox co-mingled rental income from properties owned by the firm with funds held in trust for clients and customers; that Mr. Cox included improper fees, improper terms for forfeiture of tenant security deposits, and failed to include a description of rights and responsibilities in the event of a mandatory evacuation in the firm’s vacation rental agreements; that Mr. Cox failed to ensure that the Firm’s property management agreements both conspicuously disclosed that trust funds would be deposited in an interest bearing account and included the license number of the broker signing the agreement.

JOSEPH J. CURRIN, III (Fayetteville) – By Consent, the Commission reprimanded Mr. Currin effective June 1, 2015. The Commission found that Mr. Currin, acting as broker-in-charge of a real estate brokerage firm, failed to properly oversee tenant security deposit accounts, which allowed an unlicensed employee to embezzle approximately $3,542 of client monies within one year. The Commission noted that upon discovering the embezzlement, Mr. Currin notified the county sheriff’s office and the Commission and replaced all client monies immediately.

JAMES H. ENGLISH (New Bern) – By Consent, the Commission suspended the broker license of Mr. English for a period of six months effective May 1, 2015. The Commission then stayed the suspension for a probationary period through and including November 1, 2015. The Commission found that Mr. English, acting as listing agent for a commercial property, was told by his client, the owner of the property for 10 years, that the water and sewer service were connected to a public source; that Mr. English, relying on the information communicated by his client, prepared the listing description for the MLS, indicating that the property was connected to city water and sewer, and did not independently verify this information; that Mr. English then represented a buyer of the property as a dual agent and executed all of the proper disclosures regarding representation; and that after closing, the buyer learned that the property is not connected to city water or sewer, but rather to a septic system.

FLAGSHIP PROPERTY MANAGEMENT LLC (Greenville) – By Consent, the Commission suspended the firm license of Flagship Property Management LLC for a period of 18 months effective March 1, 2015. The Commission then stayed the suspension for a probationary period ending September 1, 2016. The Commission found that Flagship Property Management, from June 2008 until December 2010, conducted business without a designated broker-in-charge; that from June 2009 until July 2009, and again from June 2010 to July 2010, Flagship Property Management operated with an expired broker license; that from July 2009 until December 2010, Flagship Property Management operated with an inactive broker license; that Flagship Property Management charged fees and marked up the cost of repair work without first disclosing these charges to property owners; that Flagship Property Management paid referral fees directly to provisional brokers; that Flagship Property Management failed to keep trust account records in accordance with Commission Rules and did not properly maintain its rental trust accounts resulting in possible shortfalls of as great as $19,988.09; and that in 2013 and 2014, the rental trust account was charged insufficient fund fees and other bank fees totaling $750, which were not reimbursed.

DEBRA J. HEPFER (Statesville) – By Consent, the Commission reprimanded Ms. Hepfer effective April 1, 2015. The Commission found that Ms. Hepfer discussed the purchase of real estate properties with a potential buyer and, after learning that the buyer would not qualify for a loan, introduced the buyer to a real estate investor who would purchase the property and, in turn, finance the sale of it to the buyer; that Ms. Hepfer acted as buyer agent for the investor in the purchase of the property while keeping in communication with the buyer about the closing process; that Ms. Hepfer never delivered or discussed a Working With Real Estate Agents brochure with the buyer, making it unclear to the buyer exactly who Ms. Hepfer was representing; that the buyer had agreed to pay the $1,000 Earnest Money Deposit, $450 appraisal fee, and other repairs on the property; that Ms. Hepfer collected the funds in cash from the buyer and delivered them to the investor without placing the money in an account designated as trust or escrow; and that after the investor purchased the property, the oral agreement to finance the purchase of the property fell apart, and the investor has refused to refund monies paid by the buyer.

ERNEST FILMORE HILL III (Henderson) – By Consent, the Commission reprimanded Mr. Hill effective March 18, 2015. The Commission found that Mr. Hill, on January 30, 2014, pleaded guilty to misdemeanor first degree trespassing and was sentenced to 30 days incarceration which was fully suspended, 18 months supervised probation, and ordered to pay $1,144.50; that Mr. Hill reported the plea and sentence to the Commission within 60 days, but failed to provide a narrative regarding the incident or a certified copy of the judgment against him; and that Mr. Hill failed to respond to three letters of inquiry from the Commission requesting the missing information.

MARY LYNNE JONES (Banner Elk) – The Commission accepted the voluntary surrender of the broker license of Ms. Jones for a period of five years effective March 18, 2015. The Commission dismissed without prejudice allegations that Ms. Jones violated provisions of the Real Estate License Law and Commission rules. Ms. Jones neither admitted nor denied misconduct.

STANLEY BERNARD JONES (Raleigh) – By Consent, the Commission suspended the broker license of Mr. Jones for a period of 21 months effective January 1, 2015. Ten months of the suspension were active with the remainder stayed for a probationary period ending October 1, 2016. The Commission found that, following a hearing on August 8, 2013, the Commission issued Findings of Fact and an Order in which Mr. Jones received two years suspension with three months active suspension and the remainder stayed if Mr. Jones met specified criteria by June 1, 2014; that the Order included a condition that if Mr. Jones violated the Real Estate License Law or Commission rules within the active stayed suspension period, the remaining term of the stayed suspension would become active; and that on and around October 11, 2013, Mr. Jones knowingly engaged in brokerage activities while his license was actively suspended.

LAKE GASTON RENTAL HOMES LLC (Littleton) – The Commission accepted the permanent voluntary surrender of the firm license of Lake Gaston Rental Homes effective March 1, 2015. The Commission dismissed without prejudice allegations that Lake Gaston Rental Homes violated provisions of the Real Estate License Law and Commission rules. Lake Gaston Rental Homes neither admitted nor denied misconduct.

CONAN R. MCCLAIN (Raleigh) – By Consent, the Commission suspended the broker license of Mr. McClain for a period of 12 months effective April 1, 2015. The Commission then stayed the suspension for a probationary period of 12 months. The Commission found that Mr. McClain, currently the Broker-in-charge of a sole proprietorship, performed development, management, and leasing services on commercial units located at a development from 2006-2012; that Mr. McClain could not produce a copy of a signed Development and Services Agreement executed with the owner of the property; that, despite having an exclusive leasing agreement with owner, Mr. McClain became a majority owner in one of the leased units by investing his personal money in that business and failed to receive written consent from the owner or execute a dual agency agreement; that in 2008, Mr. McClain entered into a Development and Services Agreement for the development, leasing, and management of multi-building warehouse/office projects; and that this agreement lacks Mr. McClain’s broker license number, does not set a definitive expiration period, does not give the landlord the ability to terminate at the end of a contract period or subsequent renewals, and does not contain the fair housing provision.

JAMES M. MCCLURE (Raleigh) – The Commission accepted the permanent voluntary surrender of the broker license of Mr. McClure effective March 18, 2015. The Commission dismissed without prejudice allegations that Mr. McClure violated provisions of the Real Estate License Law and Commission rules. Mr. McClure neither admitted nor denied misconduct.

CECIL A. PARKER, JR. (Smithfield) – By Consent, the Commission suspended the broker license of Mr. Parker for a period of 18 months effective March 1, 2015. The Commission then stayed the suspension for a probationary period of 18 months. The Commission found that Mr. Parker, acting as a listing broker, failed to disclose that a major highway expansion would affect his listed property; that a buyer attended a public hearing after closing on Mr. Parker’s listed property at which the buyer was informed that, depending upon the chosen route, the buyer’s property would either be taken by the State of North Carolina or be within 0.5 mile of the highway.

RANDALL E. ROBINSON (Littleton) – By Consent, the Commission suspended the broker license of Mr. Robinson for a period of 18 months effective February 19, 2015. One month of the suspension was active with the remainder stayed for a probationary period ending September 19, 2016. The Commission found that Mr. Robinson, until February 2014, was broker-in-charge for a real estate brokerage firm; that while Mr. Robinson was broker-in-charge of the firm, it managed no more than 10 properties at any one time; that Mr. Robinson relied on assurances from the firm’s qualifying broker, a Certified Public Accountant, that trust account records were being maintained in accordance with the Commission rules, but failed to personally supervise and maintain trust account records; that an audit of the firm’s trust accounts revealed improper record keeping, shortfalls, and commingling of trust account funds with operating funds; that Mr. Robinson relied on assurances from the qualifying broker that the firm’s management and vacation rental agreements were reviewed by an attorney, but failed to personally ensure that rental management agreements complied with Commission Rules and that vacation rental agreements complied with the NC Vacation Rental Act, the NC Tenant Security Deposit Act, and Commission Rules; that Mr. Robinson allowed the firm to manage rental properties under expired management agreements and, in some cases, without management agreements; and that Mr. Robinson failed to properly review advertising agreements made by provisional brokers on behalf of the firm.

JOAN ELLEN RUSSELL (Hendersonville) – By Consent, the Commission reprimanded Ms. Russell effective March 1, 2015. The Commission found that Ms. Russell, as qualifying broker and broker-in-charge of a real estate brokerage firm, was responsible for a trust account that contained an overage of $1,112.49 in the tenant security deposit account and an overage of $328.82 in the rental trust account, and that Ms. Russell failed to maintain accurate records in accordance with Commission trust account rules.

RUSSELL PROPERTIES OF NC, INC. (Hendersonville) – By Consent, the Commission reprimanded Russell Properties effective March 1, 2015. The Commission found that Russell Properties, a real estate brokerage firm, held trust accounts that contained an overage of $1,112.49 in the tenant security deposit account and an overage of $328.82 in the rental trust account, and that Russell Properties failed to maintain accurate records in accordance with Commission trust account rules.

JAY C. SNOVER (Charlotte) – By Consent, the Commission reprimanded Mr. Snover effective March 1, 2015. The Commission found that Mr. Snover advertised commercial property by placing signage on it and showed this property to a potential renter/buyer in May of 2012; that Mr. Snover represented to the potential renter/buyer that he was also the owner of the property and the potential renter/buyer signed a lease agreement and gave checks for the Earnest Money Deposit and first month’s rent to Mr. Snover; that Mr. Snover did not sign the agreement and held, but did not deposit, the two checks; that after weeks of communications between Mr. Snover and the renter/buyer regarding access to the property and transfer of keys, Mr. Snover returned the checks. The Commission noted that Mr. Snover’s company was the winning bidder on the property through a foreclosure sale, which was set aside in April 2012 by the court, but Mr. Snover was later successful in purchasing the 1st lien on the property in July 2012.

ROBERT W. STEELE II (Jacksonville) – By Consent, the Commission reprimanded Mr. Steele effective April 1, 2015. The Commission found that Mr. Steele, in 2008, purchased a lot in a residential subdivision; that at the time of the purchase the street providing access to the property had been dedicated to public use, but had not been accepted by the State for maintenance; that Mr. Steele sold the property in May 2009; and that at no time did Mr. Steele disclose to the potential buyers that the street providing access to the property was a private street.

UNITED MANAGEMENT, INC. (Fayetteville) – By Consent, the Commission reprimanded United Management effective June 1, 2015. The Commission found that the broker-in-charge of United Management in and around 2013 failed to properly oversee tenant security deposit accounts which allowed an unlicensed employee to embezzle approximately $3,542 of client monies within one year; and that upon discovering the embezzlement, United Management notified the county Sheriff’s Office and the Real Estate Commission and replaced all client monies immediately.

TIFFANY MELISSA WARREN (Lake Junaluska) – The Commission accepted the voluntary surrender of the broker license of Ms. Warren for a period of three years effective February 11, 2015. The Commission dismissed without prejudice allegations that Ms. Warren had violated provisions of the Real Estate License Law and Commission rules. Ms. Warren neither admitted nor denied misconduct.

This article came from the May 2015-Vol46-1 edition of the bulletin.

Learn More About Automated Valuation Models

Automated valuation models (AVMs) have become a recent topic of interest for some in both the real estate brokerage and appraisal communities.

An AVM is a computer software program that analyzes data from various sources and uses automated processes to produce a value or range of values for a particular property.

To assist you in learning more about AVMs, click on http://www.ncrec.gov/pdfs/avm.pdf and read the Commission’s article on the subject. If you have any questions or need more information, please contact the Regulatory Affairs Division at 919/875-3700.

This article came from the February 2015-Vol45-3 edition of the bulletin.

Know How to Procure and Dispose Of Tenant Background Information

One of the primary duties of a property manager is to procure qualified tenants for properties under management. Determining whether a tenant is “qualified” generally involves more than looking at a prospective tenant’s income. It often involves looking at things like a prospective tenant’s credit history, credit score, employment history, rental history, criminal record and more. Each of these factors can be important in making a decision to rent a property.

The Federal Trade Commission’s BCP Business Center (www.business.ftc.gov) has published the following articles which contain useful information on this topic for property managers: “Using Consumer Reports: What Landlords Need to Know,” “A basic ‘tenant’ of credit reporting,” and Disposing of Consumer Report Information? Rule Tells How.”

More and more property managers are turning to consumer reporting agencies (CRAs) to obtain information about prospective tenants. Common types of CRAs include credit bureaus, tenant-screening services and reference-checking services. CRAs must comply with the Fair Credit Reporting Act (FCRA). Established in 1970, the FCRA is designed to ensure the confidentiality and accuracy of consumer credit information.

CRAs have a duty to inquire about the intended use of consumer information before actually providing the information.  Use of consumer information for tenant-screening purposes is permissible.  Using the information to spy on competitors, neighbors, and former spouses is prohibited.

If a property manager refuses to rent to a prospective tenant or changes the rental terms (e.g. increasing the rent, increasing the security deposit, requiring a co-signor, etc.) based even partially upon information in a consumer report, then the property manager must give the prospective tenant an “adverse action notice.”  Although giving an oral notice is permitted, written notice is recommended, because it provides evidence of compliance with the FCRA.

According to the FTC, an adverse action notice “… must include the name, address and telephone number of the CRA that supplied the consumer report, including a toll-free telephone number for CRAs that maintain files nationwide; a statement that the CRA that supplied the report did not make the decision to take adverse action and cannot give the specific reasons for it; and a notice of the individual’s right to dispute the accuracy or completeness of any information the CRA furnished, and the consumer’s right to a free report from the CRA upon request within 60 days.”

Property managers and landlords who fail to comply with the FCRA can be sued in federal court.  If a broker or landlord loses such a case, then he or she may have to pay court costs, the plaintiff’s reasonable legal fees and punitive damages.  For more information on the FCRA or for a copy of the Act, you may call 1-877-382-4357 or go online at www.ftc.gov/os/statutes/fcrajump.shtm.

Commission Rule A.0108 requires brokers to retain records of rental transactions for three years. If a tenant’s rental application is rejected, then the broker should retain the tenant background information for three years from the rejection date. If a tenant’s rental application is approved and the tenant enters into a lease, then the broker should retain the background information for three years following the termination of the tenant’s lease.

When disposing of the information obtained from CRAs, landlords and property managers who acquired the information for business purposes must comply with the Disposal Rule which is enforced by the Federal Trade Commission.  While the standard for proper disposal is flexible, property managers must take reasonable measures to ensure that all consumer information is disposed of in a manner that would prevent an unauthorized person from acquiring and using the information. For paper documents, shredding (so that they cannot be read or reconstructed) and burning are two methods of disposal that would satisfy the requirements for proper disposal. For digital information, destroying or erasing electronic files so that the information cannot be read is also acceptable.

While property managers may use CRAs as a tool for screening prospective tenants, they must exercise care to protect the information they obtain and to dispose of it in a manner that will prevent its use by unauthorized persons or for unauthorized purposes.

This article came from the February 2015-Vol45-3 edition of the bulletin.