Frequently Misunderstood Terms Seen and Heard by NCREC Regulatory Affairs Division Staff

By Stephen Fussell, Chief Consumer Protection

At the Commission, we hear and read lots of statements from real estate brokers. Some of those statements imply that the brokers who made them did not understand the terms they were using. Here are some clarifications for some of the things we routinely hear and read.

The North Carolina Real Estate Commission (“Commission”) and NC Realtors (“NCR”) are two different organizations.

• The Commission is the state government agency which licenses and regulates real estate brokers. The only fillable forms published by the Commission for use with consumers are the Working With Real Estate Agents Disclosure, the Residential Property and Owners’ Association Disclosure Statement, and the Mineral and Oil and Gas Rights Mandatory Disclosure Statement. However, the Commission also publishes informative books and pamphlets including the North Carolina Real Estate Manual, Real Estate eBulletin (monthly), Broker-In-Charge Best Practices Guide, Residential Square Footage Guidelines, and lots of Question and Answer brochures. The Commission regulates brokers through the Real Estate License Law (Chapter 93A of the North Carolina General Statutes) and the Commission’s rules, both of which can be viewed at ncrec.gov.
• The NCR is a private, voluntary trade organization with local associations covering various geographic regions of the State. The local associations usually are associated with the MLS systems used by brokers, and membership in the association is required for access to the MLS. NCR publishes agency agreement forms, contract forms, lease forms, and many other forms used by its members. Members of NCR must adhere to the National Association of Realtors’ Code of Ethics. The term, “Realtor,” applies to someone who is a member of NCR. Not every licensed real estate broker in North Carolina is a member of NCR; therefore, not every broker is a Realtor.

Client vs. Customer: A client is someone with whom a broker has a written agency agreement. The broker represents the client and has a fiduciary duty to act in the best interests of the client at all times. Prior to entering into the written agency agreement, the client was a customer.  Additionally, in serving a client, a broker may assist a customer. A broker must be fair and honest with a customer. However, a broker does not represent a customer or have a fiduciary duty to act in a customer’s best interest.

Example #1: A property manager represents a landlord (client). A property manager may assist a prospective tenant (customer) in viewing a rental property and entering into a lease for the landlord’s property.

Example #2: A listing agent may show their listing to an unrepresented prospective buyer (a customer) and prepare an offer for the buyer without representing the buyer. The listing agent must review a Working With Real Estate Agents Disclosure with the buyer at first substantial contact and mark the “Unrepresented Buyer” section at the bottom of the form.

Offer vs. Contract: An offer is an oral or written expression of a willingness to buy, sell or lease at a specified price and terms. A contract is a signed, written agreement that memorializes all of the terms and conditions agreed upon by the parties. Buyers usually submit offers. If sellers sign the offer without changes and communicate this fact to the buyers, then the offer becomes a contract. If sellers make changes to the offer they receive, then the sellers have created a counteroffer. The sellers must initial the changes and sign the counteroffer and the buyers must initial the changes and communicate their acceptance in order for the counteroffer to become a contract.

Acceptance of an offer occurs when the last party to receive an offer or counteroffer signs the offer/counteroffer. Acceptance must then be communicated to all parties before the offer becomes a contract. Pursuant to the Statute of Frauds, there is no such thing as “verbal acceptance” of a real estate sales offer. If a seller says they will accept an offer, it has no effect until the seller actually signs the offer without making any changes to it and then communicates that fact to the buyer. Brokers should never use the terms, “verbal acceptance” and “verbally accepted,” as these terms are misleading and may cause a buyer or seller to falsely believe that a valid contract has been formed. If an offer is not signed by all parties, then it’s not a contract. For more information on the Commission, agency, offer & acceptance, and many other topics, check out the many brochures, publications, and videos available at ncrec.gov.