By Elizabeth W. Penney, Information Officer
Lucky you! You’ve just placed a “hot” listing on the market and you already have an offer. Before you can deliver the offer to the seller, second and third offers arrive.
While you may feel confident in your ability to handle and negotiate a single offer, you may feel less certain in a multiple offer situation. Diligence and fairness to all including your seller-client and the prospective buyers is required to avoid problems. Emotions run high and care is needed to avoid a complaint. Buyers and their agents are impatiently waiting for an answer. Here are a few suggestions to consider when multiple offers occur.
Present all offers immediately. Commission Rule A .0106 states that “every broker shall deliver a copy of any written agency agreement, contract, offer, lease, rental agreement, option or other related transaction documents to their client within five days of the document’s execution.” Preferably, a broker will not wait five days but will deliver an offer to their client as soon as possible. Presenting an offer means personally delivering the offer or transmitting a copy of it to the seller. Oral communication of an offer is not sufficient to satisfy the Commission’s rule. If multiple offers arrive at the agent’s office before he or she has the opportunity to present any offer, the listing agent should try to present all offers at the same time to the seller.
A seller can elect to work only with one offer, or if the seller does not find any offer acceptable, the seller may ask some or all the prospective buyers to submit their highest and best offers. It is the seller who must make that decision, not the listing agent. If the seller calls for highest and best offers, the listing agent should advise all buyers they can submit a new offer or stand by their original offer. Contrary to some thinking, there is no ”first in the door” rule. In other words, in multiple offer situations there is no priority to one offer over another. A seller is not bound to consider offers in the order in which they were received, whether they are full price or exceed full price without concessions.
Shopping offers is strictly prohibited. Since 2008, Commission Rule A.0115 has prohibited brokers from sharing the price or other material terms in offers with competing parties without the express authority of the offering party (the buyer). Generally, there is no advantage to a buyer in sharing their offer’s terms with competing buyers.
In today’s market there are seasoned sellers as well as sellers who need assistance in evaluating offers and assessing the differences in the various terms and conditions. A listing agent can assist the seller in reviewing the different terms in order to choose the best offer for that particular seller. Once an offer is accepted, the seller may consider a back-up offer.
Occasionally a buyer agent asks to be present when an offer is presented. A listing agent should discuss such a request with the seller and allow the seller to make that decision.
Communicate with all prospective purchasers and their agents. A broker is not required to disclose a multiple offer situation, but should answer any questions about whether or not there are multiple offers honestly. The broker should follow the direction of their seller in what the seller wishes to be communicated, but the broker also should not “go dark” and fail to respond to contact attempts by buyers and their agents. By following the advice above, multiple offers can be handled successfully and efficiently with all parties being treated fairly and honestly.
This article came from the October 2017-Vol48-2 edition of the bulletin.
Kaitlin T. Romanelli of Alpharetta, Georgia, Campbell University third-year law student, with Commission Chair Robert J. Ramseur, Jr., and Vice Chair Anna Gregory Wagoner, received the Allan R. Dameron Legal Internship Award at the Real Estate Commission’s June meeting. The award is presented annually in memory of and tribute to former Commission member Allan R. Dameron for his dedicated service in protecting the interests of consumers.
This article came from the October 2017-Vol48-2 edition of the bulletin.
By Stephen L. Fussell,
Sr. Consumer Protection Officer
In April of 2017, a real estate sales transaction was about to close. The buyers’ agent received an email from someone she believed to be a member of the closing attorney’s staff. The email asked for the buyers’ email address. The buyers’ agent replied with the buyers’ email address.
The buyers received a telephone call from someone who identified himself or herself as an employee of their mortgage company advising them that they would soon receive an email with instructions for wiring money to the closing attorney. The buyers then received an email from someone they believed was their agent. This email contained instructions for the buyers to perform a wire transfer to send their down payment in the amount of $52,200 to the closing attorney. The buyers followed these instructions and then sent an email to their agent confirming that they had sent the money as their agent had instructed. The buyers’ agent quickly responded that she had not sent them an email with wire transfer instructions.
The buyers’ agent immediately contacted the closing attorney’s office and discovered that it had not received the $52,200 from the buyers and that all of the aforementioned communications were from a person or group of persons scheming to steal the buyers’ money. Apparently, the person or group of persons had hacked into the broker’s email account and/or computer.
The emails sent by the fraudster(s) contained exact copies of the email signatures of the closing attorney’s office staff member and the buyers’ agent. These email signatures gave the impression of authenticity. However, the email addresses from which these emails were sent were very close to but not the actual email addresses of the closing attorney’s office or the buyers’ agent.
The closing attorney reported the incident to the FBI and contacted the bank that transferred the money and the bank that received the money. However, the receiving bank refused to put a hold on the money thereby enabling the scammers to walk away with the money.
This true story was a difficult lesson for the buyer agent and her buyer-clients. All brokers can learn from this incident. If you receive an email or telephone call from someone asking for personal or financial information about you or a client, exercise care to verify the identity of the person requesting the information before disclosing such information.
In this incident, the buyers’ agent could have called the closing attorney’s office to verify that they needed the buyers’ email address. The agent should have used the attorney phone number she knew, not a phone number provided in the email. This one call would have enabled the buyers’ agent to discover that the closing attorney’s office had not requested the buyers’ email address. The buyers’ agent should also have advised her clients to be cautious about verifying information as well and to not wire money without speaking to someone in the closing attorney’s office first.
Please use this incident as a guide for your future real estate dealings and consider creating procedures to prevent such scams from happening to you or your clients.
This article came from the October 2017-Vol48-2 edition of the bulletin.
By Charlie Moody
Assistant Director, Regulatory Affairs Division
Bokers continue to grapple with the questions: “What can I add to standard form purchase contracts?” “What is drafting?;” “When have I crossed the line?” Commission rule A .0111 allows brokers to complete contract forms when authorized to do so by the parties. In other words, they may “fill in” the blanks in preprinted contract forms, usually with dates or dollar amounts, but may not draft contracts or special contract provisions between other parties.
Any document imposing an obligation between two or more separate persons or entities and supported by consideration is generally a contract, including a “letter of intent” or “memorandum,” an additional provision or addendum to a contract, a lease, option, etc. No matter what such documents are called, they are often actually contracts which must be drafted by an attorney, not a broker.
Brokers are advised to always refer parties to an attorney to have a contract, addendum or special provision drafted when an appropriate form is not available. Moreover, do not use documents from prior transactions that were created for other parties as “forms” to be completed for current transactions. Every situation is unique and may need different language to adequately protect a user’s interests. Don’t draft atypical, special provisions for insertion in contract forms.
But why can’t I?
The Commission cautions against drafting additional terms because it could lead to at least two potential problems:
(1) It could constitute the unauthorized practice of law, and
(2) it often results in the use of vague terms which may confuse the parties or otherwise create problems.
The “practice of law,” as determined by statute and court decisions, includes the drafting of documents which define the rights of others. “Drafting” means composing phrases and sentences to convey an intended meaning by choosing which words to use and the order in which to use them. Therefore, although brokers may believe they are capable of competently drafting contract terms, they are not legally authorized to do so unless they are also Iicensed attorneys. “If”, “then”, “must”, and “shall” are all words that would definitely indicate contract terms are being drafted.
Further, non-attorney brokers drafting contract provisions increase the possibility of vague terms/conditions being used. Vague terms/conditions confuse the parties as to their contractual obligations and/or inadequately protect their interests.
A common type of vague contract term is adding a condition instead of a date. For example, a closing date described as “when the buyer gets financing” is too vague. When is that? Is it when the buyer gets loan approval? Or is it when the lender gives final authorization to disburse? Lenders have been known to back out at any time prior to the disbursement. How is the contingency fulfilled? What happens when ten months have passed and the buyer doesn’t have a loan yet? Has there actually been a breach? Can the seller terminate?
Another commonly added condition requires a party’s satisfaction with certain occurrences. Who determines the standard of “satisfactory”? The buyer? The seller? What if they disagree? A provision drafted and added to or deleted from the contract is especially problematic if the change conflicts with some other term of the contract. Contracts work as a whole with one paragraph often referring to another. Brokers may not always consider that a change to a provision in paragraph 12 may affect rights in paragraph 5.
Parties sometimes disagree over the meaning of a contractual term, and its interpretation is then ultimately determined by the courts. When a court considers a term to be so vague that it can be interpreted two ways, the court usually will interpret it in favor of the party who did not draft it. Therefore, a broker who drafts vague terms does so to the detriment of his or her own client, and risks disciplinary action by the Real Estate Commission, injunctive relief through the State Bar, as well as the possibility of criminal charges.
The Bottom Line: Do not draft contractual terms. If the language supplied by a form does not appropriately address the issues, refer the parties to their attorneys. If another agent or a party to the transaction or even an attorney drafts a contractual term, review it carefully, but also advise your client to have an attorney review the language to see if it meets the needs of the client. Be particularly concerned about any provision which includes a subjective standard (such as “satisfactory”) or is otherwise vague as to fulfillment, does not set a deadline for fulfillment, or does not specifically require notice to the other party and specify how parties are to notify each other of fulfillment.
If you are adding words or conditions other than referencing preprinted addenda, you are likely to be drafting contract language. To ensure that you are best serving your clients and avoiding violating the law as well as treating all of your customers fairly, be sure that drafting the rights and obligations of the parties to the transaction is left to a licensed attorney who can create documents or language specifically for that client or customer.
This article came from the October 2017-Vol48-2 edition of the bulletin.
Three North Carolina brokers recently received scholarships from the Commission for academic excellence in real estate courses.
The recipients, each of whom received $400 for tuition, are Gloria O. Brinkley, Lexington, the Joe Schweidler Memorial Scholarship Award; Julie L. Parrish, Durham, the Blanton Little Memorial Scholarship Award; and Linda J. Mehner, Wilmington, the Phillip T. Fisher Scholarship Award.
Brinkley and Parrish were selected by the North Carolina Association of REALTORS® for achievement in the Graduate Realtors® Institute (GRI) program. Mehner was selected by the North Carolina Chapter of the Council of Residential Specialists for achievement in the Certified Residential Specialists (CRS) program.
Little and Schweidler were former Secretary-Treasurers of the North Carolina Real Estate Licensing Board. Fisher was Executive Director of the Real Estate Commission from 1981 to 2010.
This article came from the October 2017-Vol48-2 edition of the bulletin.
In the article, “Due Diligence Fees: When Are They Refunded?”, in the May 2017 Bulletin, the following sentence appears as the result of a production error: Buyers and sellers may enter into other addenda that may provide for a due diligence fee refund but those provisions must be drafted by the parties or, preferably, by an attorney or by a broker.” The statement, “…or by a broker”, is incorrect; only an attorney or the parties to the contract can draft language for contracts or addenda.
This article came from the October 2017-Vol48-2 edition of the bulletin.
(The following article is copyrighted by and reprinted with the permission of the Association of Real Estate License Law Officials (ARELLO®)).
The Consumer Financial Protection Bureau (CFPB) recently finalized amendments to its “Know Before You Owe” mortgage disclosure rules, one of which should make it easier for real estate professionals to obtain access to the “new” Closing Disclosure (CD) form.
The CFPB TILA-RESPA Integrated Mortgage Disclosure rules (commonly referred to as “TRID”, but labeled “Know Before You Owe” by the CFPB) took effect in October 2015. The rules replaced the previous disclosure forms required in all “federally-related” residential mortgage transactions, including the once familiar HUD-1 settlement statement, with the CFPB’s mortgage Loan Estimate and Closing Disclosure forms.
When the lengthy and intricate new TRID rules took effect, much attention was focused on the resulting compliance issues and mortgage process disruptions that were experienced by mortgage lenders/ originators, title companies and other transaction service providers. Less publicized was an unintended consequence of the rules that left many real estate licensees with difficulties in obtaining copies of completed Closing Disclosure forms from lenders. The problem arose from lender concerns regarding the privacy provisions of the Graham-Leach-Bliley Act (GLBA) and Regulation P, which restrict lender disclosure of customers’ “nonpublic personal information” (NPI) to third parties. This complication, as well as the nature and contents of the Closing Disclosure form, also prompted some state regulators to address the impact of TRID on real estate license law matters such as recordkeeping and transaction closing statement requirements.
The National Association of REALTORS® (NAR) has previously pointed out to the CFPB that, prior to implementation of TRID, real estate agents routinely had access to and used the now-defunct HUD-1 settlement statement to answer client questions about matters such as concessions, escrows, commissions and prorated taxes. NAR has also urged the CFPB to clarify that, under Regulation P, “…it is just as acceptable now as it was before Know Before You Owe for a lender to share the [Closing Disclosure] with third parties ….”
For its part, the CFPB’s rulemaking proposal issued in July 2016 acknowledged that the Real Estate Settlement Procedures Act (RESPA) and its implementing regulations required settlement agents to issue the HUD-1 form to lenders, borrowers, sellers, and their agents. The CFPB also acknowledged that, in accordance with applicable exceptions to the privacy requirements of the GLBA, it [is] “usual, accepted, and appropriate” for creditors and settlement agents to provide the new Closing Disclosure form to consumers, sellers, and their real estate brokers or other agents. Consequently, the CFPB’s recent final rules incorporate its previous informal guidance on the subject and modify the official TRID commentaries to clarify that a creditor may provide separate disclosure forms to a consumer and seller if state law prohibits sharing information in the disclosure form, as well as in any other situation where the creditor chooses to provide separate disclosures, and establishes the three methods that may be used to make such modifications.
Among numerous other amendments, the final rules also create tolerances for “total of payments” calculations, adjust an exemption mainly affecting housing finance agencies and nonprofits, and extend coverage of the disclosure requirements to cooperative units.
This article came from the October 2017-Vol48-2 edition of the bulletin.
Cindy S. Chandler and Thomas R. Lawing, Jr., both of Charlotte, have been reappointed to the North Carolina Real Estate Commission for three-year terms beginning August 1, 2017 and July 1, 2017, respectively, it was announced by Miriam J. Baer, Executive Director.
Chandler was reappointed by President Pro Tempore of the Senate Phil Berger and Lawing was reappointed by Speaker of the House Tim Moore.
This article came from the October 2017-Vol48-2 edition of the bulletin.
Sandra L. O’Connor of Greensboro has been appointed to the North Carolina Real Estate Commission by Governor Roy Cooper, it was announced by Miriam J. Baer, Executive Director.
Broker-in-charge of the Greensboro Green Valley Branch of Allen Tate Company, O’Connor has been a licensed North Carolina real estate broker since 1983. From 1985 to 2005, she was the owner and sole proprietor of Sandra O’Connor & Associates.
O’Connor has been active with the national, state, and local REALTOR® organizations and in community affairs.
She is a Director of the National Association of REALTORS® and a past Region 4 Vice President. A past President of the North Carolina Association of REALTORS®, as well as a Region V Vice President and Treasurer, she received its REALTOR® of the Year award in 2014. She is a past President and REALTOR® of the Year of the Greensboro Regional REALTORS® Association and has been admitted to its Hall of Fame.
O’Connor is a past chair and member of the Greensboro Planning Board and a member of the board of directors of the Guilford Green Foundation. She holds a BA degree from Carlow University in Pittsburgh and a MA from the University of Washington in Seattle.
This article came from the October 2017-Vol48-2 edition of the bulletin.
Robert J. Ramseur, Jr., of Raleigh, has been elected Chair of the Real Estate Commission and Anna Gregory Wagoner, of Winston-Salem, Vice Chair, for the term beginning August 1, 2017, announced Miriam J. Baer, Executive Director.
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 is licensed to practice in all state courts, 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 the president of Band Together, past president of the Rotary Club of the Capital City and chair of the Board of Directors of Raleigh’s Theatre In The Park and is a member of the Board of Visitors of the Triangle Area YMCA’s Camp Sea Gull and Camp Seafarer. Ramseur received the 2017 Citizen Lawyer Award from the North Carolina Bar Association.
Wagoner is a shareholder with the law firm of Blanco Tackabery & Matamoros, P.A. in Winston-Salem and practices in the areas of commercial real estate and renewable energy.
Active in the practice of real estate law for approximately 17 years, Ms. Wagoner was formerly associated as an attorney with Investors Title Insurance Company, of Chapel Hill, SpectraSite Communications, Inc., of Cary, and Isaacson, Isaacson, Sheridan, Fountain & Leftwich, LLP, of Greensboro.
Wagoner is a member of the North Carolina Bar Association, Forsyth County Bar Association, Piedmont Triad Commercial Real Estate Women, and the North Carolina Land Title Association.
She is a graduate of Wake Forest University with a BA in Psychology and holds a Juris Doctor degree from the Wake Forest University School of Law.
This article came from the October 2017-Vol48-2 edition of the bulletin.