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Rule Revisions Permit Most BIC’s To Re-designate Before Education

Beginning July 1, most former brokers-in-charge can be re-designated as brokers-in-charge without first completing the Broker-in-Charge Course; however, within 120 days following their re-designation they must complete either the 12-hour BIC Course or, if they have completed the BIC Course within the past three years, the 4-hour Broker-in-Charge Annual Review Course.

Currently, a broker-in-charge must complete the course prior to re-designation.

The Commission found that when BICs lose their BIC status (usually due to their failure to complete all required CE or to renew their licenses on time), the offices they supervise are effectively shut down until the broker can take the BIC Course.This may require a few weeks’ wait and possibly considerable travel.

The revised rule allows the former brokers-in-charge to re-designate themselves immediately after reinstating the expired licenses (if applicable), satisfying any CE deficiency and re-activating their licenses. They then have 120 days to complete the BIC Course (or, if eligible, the BICAR Course).

Of course, they must also be able to certify on a new Broker-in-Charge Declaration that they have two years’ full-time brokerage experience within the past five years. Remember, always check with the Commission to verify the specific requirements for your particular situation!

Brokers-in-charge who do not satisfy their education requirement within 120 days following designation or re-designation are removed as BIC and must complete the 12-hour BIC Course prior to requesting to again be designated, even if the course was completed within the preceding three years.

A related rule revision reserves the BICAR Course exclusively for currently designated BIC’s and brokers who are “BIC eligible” (former BIC’s who have continuously maintained an active license and taken the BICAR Course each year). Other brokers attending the BICAR Course will not receive any CE elective credit for it. A Certificate of Eligibility (verification of BIC status) can be obtained from the Commission’s website.

A further rule revision exempts from the broker-in-charge requirement sole proprietor brokers who hold tenant security deposits only in a trust account for properties they personally own.

This article came from the May 2009-Vol40-1 edition of the bulletin.

QB’s, BIC’s Renew Firm, Broker Licenses

As a qualifying broker and/or broker-in-charge of a real estate firm, you have certain responsibilities to assure that firm and individual licenses are renewed by the June 30 deadline.

Qualifying brokers should be certain to renew both the firm license and their own. When you renew the firm license but fail to renew your personal license, the firm’s license will be placed on inactive status July 1.

Since a firm on inactive status cannot have agents associated with it, broker licenses are changed to reflect their home addresses and the absence of firm affiliation. And provisional brokers are placed on inactive status.

Brokers-in-charge should verify that all licensees under their supervision have renewed between May 15 and June 30. You can accomplish this at the Commission’s website, www.ncrec.state.nc.us.

The “BIC Only” tab on the website gives you access to a variety of current data on those under your supervision. To view and print the information, click on the tab and enter your license number and PIN (the last four digits of your Social Security number unless you have changed it).

In addition to your personal information), you will find the following:

• A listing of all licensees which, according to Commission records, are affiliated with you or under your supervision.

• The “level of their licenses – “PB” (Provisional Broker), or “B” (Broker).

• Their license renewal date.

• Their continuing education and postlicensing credits (if needed).

If any of your agents have not renewed their licenses, you may renew them.

This is important because you, as broker-in-charge, are subject to disciplinary action if a broker at your office continues to list, sell, etc. real estate after his or her license is expired.

This article came from the May 2009-Vol40-1 edition of the bulletin.

Deadline June 30 License Renewal Begins May 15; Save Time By Renewing Online

The annual real estate license renewal period begins May 15. The Commission’s website, www.ncrec.state.nc.us, will be available on that date and through the June 30 deadline for online renewing.

Login at the website and go to Renew/Reinstate and enter your license number and PIN (personal identification number). Unless you have changed your PIN, it will be the last four digits of your Social Security number. Charge the $40 fee using your MasterCard or Visa.

You will receive confirmation, which you can print, that your renewal is being processed by the Commission. While online, update your email, fax and residence address, if needed.

You must renew on or before the deadline of midnight, June 30. If you renew by mail, your renewal must be received at the Commission office on or before that date.

If you miss the deadline, your license will expire and you must pay a $55 fee to reinstate it.

While online, check your continuing education and postlicensing credit information to be certain they has been properly recorded. If you have not completed all your continuing education (eight hours, four of which are the Update Course), you may do so by the June 10 deadline. There are no CE classes after that date until July. Incomplete CE results in the change of status of an “active” license to “inactive” on July 1.

Allow 15 days following a class for any credits to be reflected. The CE credits displayed on the label of this Real Estate Bulletin are those posted about two to three weeks before its arrival. Those posted on the website will be more current.

This article came from the May 2009-Vol40-1 edition of the bulletin.

Getting Savvy About Short Sales

By Miriam J. Baer, Assistant Director, Legal Counsel, Legal Services 

In today’s economic climate, you may encounter sellers who owe more for their property than it is worth, i.e., they’re “upside down” or “under water” on their mortgage. They may have more than one mortgage, a home equity loan, outstanding judgments and tax liens that must be dealt with before selling – one or all of which exceed the value of the property.

For sellers in financial distress, a “short sale” may help. A short sale occurs when a lender accepts a discounted payoff of the loan balance and gives up its interest in the property. In some cases, the seller is relieved of further liability; in others, the seller may still be indebted to the lender for the balance.

Lenders may agree to “short sales” to avoid the expense of a foreclosure, but often impose certain conditions:

•   Loan status: Usually, the loan must be in default or imminent default; sometimes being “upside down” is enough.

•  Hardship: Sellers must demonstrate that circumstances beyond their control prevent them from making their mortgage payments.

•   Financial Status: Sellers must demonstrate insufficient resources to cover the loan amount.

•  Loan Fraud: There must be no evidence of fraud in connection with the original loan. The lender is more likely to suspect fraud if default occurs within the first 12 months of the loan term.

•   Property Value: The property must be appraised to determine the amount the lender will accept.

Although the buyer and seller have a contract, the seller’s lender is in control in a short sale and can “just say no” to prevent it. Therefore, closing the sale is more uncertain than in ordinary transactions. 

Listing Agent Responsibilities

Before you list a property, determine whether there is any possible need for a short sale, and be prepared to advise the seller about the process and consequences of one. While better than foreclosure, the seller’s credit record will suffer. The process can take more time and the lender can simply stop it at any time. Suggest that the seller consider other options, including loan modification, refinancing, giving the lender a deed in lieu of foreclosure, or allowing foreclosure to occur. Recommend, prior to sale, consulting with the seller’s attorney and financial and tax experts.

Consider the list price carefully: it cannot be so low that the seller’s lender will reject it or it so high that buyers will lack interest.

Remember that because funds are “short,” the seller may not be able at closing to pay third parties. Payments to lien-holders and other service providers, including yourself and maybe another broker, must be addressed. While foreclosure may wipe out some liens, a short sale requires negotiation with all lien-holders.

A short sale is a material fact. As listing broker, you must disclose this to the buyer and buyer agent. 

Short Sale Addendum – Listing Contract

Address in the listing contract a seller attempt at a short sale. The North Carolina Association of REALTORS® has developed a new Short Sale Addendum to Exclusive Right to Sell Listing Agreement which:

•   requires the seller to work to obtain lender approval, including providing necessary financial information; and

•  allows the listing agency to market the property as a short sale or pre-foreclosure property, to continue marketing while it is under contract and the lender is considering contract approval, and to disclose information to the lender and buyer agent.

Buyer Agent Responsibilities

When looking at properties and before making an offer, try to determine whether the property may be a short sale. The listing agent should disclose it, but if you have any doubt, ask for information about the status of the seller’s loan, the possibility of a foreclosure action, and the seller’s ability to convey the property free and clear of liens.

Be particularly attentive to property value, especially in a “soft” or declining market. An asking price below the seller’s loan pay-off amount does not mean the property is worth it. Buyer agents should encourage clients to inspect the property to determine its condition, since a seller may not be financially able to make any repairs.

Some lenders in a short sale will not consider an offer until the buyer and seller have signed a contract. Make sure the buyer understands that once the contract is submitted, the lender may be slow to make a decision, require changes before approval, or even undertake foreclosure while considering it.  

Short Sale Addendum – Offer

The North Carolina Association of REALTORS® has developed a Short Sale Addendum to the standard North Carolina Offer to Purchase and Contract. It includes contingencies that allow either party to cancel the deal if the lender rejects the short sale and the buyer to terminate the contract at any time prior the lender’s approval by written notice to the seller. In either event, the buyer is entitled to the return of earnest money.

The addendum permits the seller to continue marketing the property and to communicate new offers to the lender. If those offers are higher than the contract price, the lender may reject the short sale contract in favor of a new offer or foreclose instead.

In Sum

Lenders are increasingly more likely to entertain the possibility of a short sale. However, because much of the decision-making rests with the seller’s lender, such transactions entail significant risk, particularly for the buyer. Brokers should be certain to disclose to the buyer prior to contract if a short sale is necessary to accomplish the deal, use the standard addenda or have contract language drafted to specifically address the short sale, and allow plenty of time for the transaction to close.

This article came from the May 2009-Vol40-1 edition of the bulletin.

“Fill’er Up”

Yes, for the cost of about a tank of gasoline, you can renew your real estate broker license for another year. Did you know that your $40 annual renewal fee is among the lowest in the country (only five states are lower)?

In fact, the national average is twice that charged in North Carolina.

Since 2001, your license renewal fee has increased only once (from $35 to $40) which is especially gratifying since the Real Estate Commission receives no financial assistance from the State.

You worked hard for your license. We are working hard to maintain, if not exceed, the level of service we provide to you and real estate consumers without increasing your fees or other costs.

This article came from the May 2009-Vol40-1 edition of the bulletin.

Educators Conference Draws Participants from Across State

By Pamela R. Rorie
Continuing Education Officer

An eager crowd of real estate instructors, school officials and publisher representatives attended the 2009 Real Estate Educators Conference held in Raleigh on April 14, 2009.  The Commission-sponsored meeting drew 216 participants from across the state for this year’s one-day event. Director of Education and Licensing Larry Outlaw kicked-off the conference with a discussion of the state of real estate education and licensing and invited educators to offer suggestions as to the optimal means of delivering needed instruction to licensees in specialty areas of real estate brokerage.

Lisa McQuillen, Education and Licensing Officer, followed with a Prelicensing and Postlicensing Education “update” session in which she explained proposed rule revisions and recognized prelicensing schools and instructors who had exhibited outstanding performance.

The highlight of the morning’s program was a “tag-team” presentation by Thomas Miller, Special Deputy Attorney General/Director of Legal Services, and Miriam Baer, Assistant Director of Legal Services of the NC Real Estate Commission.

They addressed such matters as misrepresentation – which is the cause of most consumer complaints, required disclosure of agent bonuses, real estate lotteries/drawings, embezzlement, and other topics as requested by the attentive crowd.

During the luncheon, the North Carolina Real Estate Educators Association (NCREEA) held its spring meeting and annual awardS presentations led by President John Carroll.

The Association presented its “Program of the Year” award to Sheila Lowery for her Continuing Education elective course,  Alternative 2 – Made Easy, and its “Educator of the Year” award to Dana Rhodes, DREI, of the Mingle School of Real Estate.

Also during the luncheon, Commission Chairperson Melvin “Skip” Alston presented the Commission’s Billie J. Mercer Excellence in Education Award to NCREEA’s Educator of the Year, Dana Rhodes. This award is presented annually in memory of former Commission member and chairperson, Billie Mercer, who was especially dedicated to the cause of real estate education. The name of each year’s award winner is engraved on the Mercer Award cup that is displayed in the Commission’s lobby. Commission Vice Chairperson Marsha Jordan was also in attendance for the presentation.

Following the luncheon, a brief Continuing Education “update” session was conducted by Continuing Education Officer, Pamela Rorie, after which participants were treated to a lively presentation by Steve Richman of Genworth Mortgage Insurance which focused on the positives of the current economy and the best sources of information regarding new loan programs and guidelines.

The conference finale was presented by Deborah Carpenter, DREI, and Brian Pate who provided useful and creative techniques for motivating and engaging real estate students.

This article came from the May 2009-Vol40-1 edition of the bulletin.

Dual and Designated Agency Among 2009-10 BICAR Topics

The 2009-10 Broker-in-Charge Annual Review course will cover dual and designated agency, compensation issues, safeguarding trust accounts, and recent changes in broker-in-charge qualification and eligibility requirements.

Expanding upon discussion in the 2007-08 BICAR course, the course will address in greater detail the differences in practicing dual agency as “traditional” dual agents versus “designated” dual agents and the underlying authority and general expectations in practicing each including confidentiality issues.

Compensation issues involve how the lack of an active license may affect payment, who may be paid and by whom, referral fees, “bird-dog” fees, finder fees and other incentives, and the effect of a firm license lapse on affiliated brokers’ entitlement to compensation.

All BIC’s must take the BICAR course during the first full license period following initial designation and each license period thereafter.

This article came from the May 2009-Vol40-1 edition of the bulletin.

Be Wary of Performing “Broker Price Opinions”

The Commission has noted an increasing number of reports of brokers providing, for a fee, a “broker price opinion” (BPO) for a party who is not a client or potential client of the broker.

The downturn in the real estate market has apparently resulted in more demand for informal estimates of the most probable sale/purchase prices for properties that are less expensive than a full appraisal.

Brokers may be requested by lenders, loan servicers, potential investors or others to provide this service for a fee, or brokers may simply be seeking alternative sources of income in a slow market.

Brokers should remember that the North Carolina Appraiser Act requires any analysis, opinion or conclusion as to the value of real estate performed for compensation to be performed by a licensed or certified appraiser.

However, the statute does provide a limited exception to this requirement that permits real estate brokers to perform a “comparative market analysis” for compensation ONLY for prospective or actual brokerage clients or for real property involved in an employee relocation program.

A “comparative market analysis” (CMA) is defined as “the analysis of sales of similar recently sold properties in order to derive an indication of the probable sales price of a particular property by a licensed real estate broker.”

A “broker price opinion” (BPO) that is based on recent sales of comparable properties is, therefore, a CMA, and may be performed for a fee only as noted above.

The Real Estate Commission considers the performance by a broker of a BPO for compensation in violation of the Appraiser Act to also constitute a violation of the Real Estate License Law.

Practice Tip

When performing a comparative market analysis or broker price opinion for a client or potential client, be sure to:

• Document your relationship with the client or prospective client.

• Document the recent sales of comparable properties upon which you base your analysis.

• Identify the results of your analysis as a “probable sales price” only and not as the “market value” or an “appraisal”.

This article came from the May 2009-Vol40-1 edition of the bulletin.

Auditor’s Corner – What do I do now? Help!

As broker-in-charge of a real estate firm, you have no shortage of things to do. And it may be that you are so busy, some never get quite the attention they deserve – like your trust accounting.

It could be that you believe your bookkeeper to be experienced and competent and therefore does not require much supervision. Perhaps the bookkeeper worked for another firm and came with good references or is a relative and, therefore, “must” be trustworthy.

But, when you finally do get around to looking at the trust account books, you discover important omissions. If that proves to be the case, here are suggestions about how to make corrections:

•  If the trust account reconciliations are not current,

•  Ascertain when the last bank reconciliation and trial balance were prepared that balanced with each other.  This will establish a starting point to catch up the trust account bookkeeping.

•  From your starting point,

•  Prepare bank reconciliations and trial balances to current.

•  Have someone other than the trust account bookkeeper do this work.  You may want to call in an independent accountant outside of your real estate firm to perform this work.  (Usually when a bookkeeper is not preparing trust account bank reconciliations, there is a reason. Most likely, the bookkeeper had trouble getting the books to balance and was not able to figure out why they didn’t.

•  If there are trust account shortages in a rental management business and you cannot fund them because of their size (most likely, in this case, the bank reconciliations have not been done for years),

•  Segregate future collections of trust monies (rents and security deposits) from the old trust funds by opening a new trust account to deposit incoming rents and security deposits.

•  Prepare trust account books (journal, ledgers, etc) and reconciliations on the new trust account in compliance with the Commission Rules and Trust Account Guidelines.  If you are using software to maintain the trust account records, contact software support for assistance in setting up the trust account books.

•  By doing this, you are not commingling the old tainted trust funds with incoming trust funds.

•  Contact the Real Estate Commission to report your problem.

As the broker-in-charge, you are responsible for the maintenance of the firm’s trust accounts.  Don’t ignore your trust account.  It can cost you your real estate license and your livelihood.  If your trust account reconciliations are not done, take action now.  Don’t wake up and find a large shortage in the trust account that you cannot fund.

This article came from the May 2009-Vol40-1 edition of the bulletin.

Agency Disclosure, “Due Diligence” Topics in 2009-10 Update Course

Discussion of “due diligence” concepts in sales transactions and agency disclosure and agreements will be the main topics of the 2009-2010 Update Course.

Exercising “due diligence” in sales transactions protects both sellers and buyers and involves careful attention to an array of matters ranging from the preparation and processing of contracts and adequate property inspections to complete and accurate closing statements.

Compliance with Commission rules relating to agency disclosure and agreements will focus on person-to-person contact versus email or telephone contact, soliciting, and forming relationships through a virtual office website (VOW).

In addition, the course will review changes in selected transactional forms and Commission rules, requirements to keep a current and active license, real estate raffles (illegal in North Carolina), and rebates to buyers.

Consideration is also being given to including some instruction on topics of particular interest to brokers involved in residential leasing and/or property management.

All licensees must complete the four-hour Update Course in each license year as part of the eight-hour continuing education requirement. Course locations and times are available at the Commission’s website, www.ncrec.state.nc.us.

This article came from the May 2009-Vol40-1 edition of the bulletin.