By Tiffany Ross, Consumer Resource Officer and Bruce Rinne, Information Officer
The North Carolina Real Estate Commission is contacted daily with questions from brokers about various topics. The responses to the five most frequently asked questions are below.
Question #1: Once a buyer has sent the termination form to the seller, can I change the property back to active in the MLS, or do I have to wait for the buyer and seller to agree in writing on the disposition of the earnest money?
This response depends on the status of the current transaction, which termination form was used, and the local MLS rules. Therefore, a broker should review the transaction with their BIC and ask for guidance on the transaction. Depending upon the geographic location, each MLS may have different rules and regulations, and brokers should review these rules prior to changing the status. If a broker uses the Offer to Purchase and Contract, Standard Form 2T, there are 4 standard termination forms created by NC REALTORS®/NCBA; therefore, it is important to use the correct form to terminate the transaction.
The contract may be terminated:
Further, failure to close does not automatically terminate a standard contract. It becomes voidable by the non-delaying party, but a termination form should be used to ensure it is properly terminated.
Question #2: Can I do business under a team name “powered by” my firm’s name, without having a business entity created in that team name?
A broker may advertise in their firm name, and even a team name, if the correct entities and/or the correct assumed business name certificate for the company is in place. Brokers may review this article published in the March 2022 eBulletin for more details: A Rose By Any Other Name – Names, Name Changes and Assumed Names. The Commission has several other resources to assist brokers with advertising their brokerage business, such as Team Scenario: Setting Up a Team Inside a Firm.
Question #3: How much time does a firm have to pay me my earned commission?
The Commission does not dictate the method/process BICs use to disburse commission /referral fees. Brokers should review their Independent Contractor Agreement that they signed with their firm. This agreement should specify the timing and method for payment of funds to the broker at the conclusion of the transaction. As a reminder, NCREC does not handle commission disputes.
Question #4: Property Management / Tenant Security Deposit Questions.
The Commission expects brokers to possess competency in the areas of brokerage in which they choose to practice. Further, if a broker chooses to practice residential property management, they must be competent in federal and state fair housing laws, the North Carolina Tenant Security Deposit Act, Residential Rental Agreements Act, and the Vacation Rental Act (if applicable), and License Law and Commission rules.Just as in sales transactions, Brokers engaged in property management are required to disclose material facts and treat consumers with honesty and fairness.
Question #5: When is the due diligence fee due? What can my seller/client do if it is not paid?
If your clients are using the Offer to Purchase and Contract, Standard Form 2-T, the due diligence fee is due immediately on the effective date of the contract, which is the date the contract is signed by all parties, and acceptance is communicated back to the offering side. If the buyer fails to deliver the due diligence fee on the effective date of the contract, the buyer could be in breach of the contract. Also, the buyer’s failure to provide the funds within one banking day of written notice can result in the contract being terminated by the seller. Moreover, the seller may be entitled to all monies due per the contract, including the due diligence fees, and any earnest money paid or due to be paid.
In the Offer to Purchase and Contract, Standard Form 2-T, if a buyer fails to deliver the Due Diligence Fee and Earnest Money Deposit, the Seller has the right to terminate the contract. However, the contract does not specify a means by which they must formally request the money. The Seller can use Form 355-T NOTICE TO BUYER TO DELIVER CASH, OFFICIAL BANK CHECK, WIRE TRANSFER OR ELECTRONIC TRANSFER and provide it to the Buyer. The Buyer will then have until the end of the next banking day to provide the Due Diligence and/or Earnest Money Deposit to the Escrow Agent as Cash, Official Bank Check, Wire Transfer or Electronic Transfer. If the Buyer does not deliver the monies, the Seller can then use Form 352-T TERMINATION OF CONTRACT (FORM 2-T) BY NOTICE TO BUYER FROM SELLER and check the box.
Once the seller submits Form 352-T, they have unilaterally terminated the contract which allows the seller to place the residential property back on the market for sale. Additionally, it may allow the Seller to sue the Buyer for not only the Due Diligence Fee but the Earnest Money Deposit as well. We recommend brokers advise their clients to seek the advice of legal counsel if they have questions about terminating a contract.
If the Offer to Purchase and Contract, Standard Form 12-T for vacant land is used, the process is similar. The Seller would use form 355-T NOTICE TO BUYER TO DELIVER CASH, OFFICIAL BANK CHECK, WIRE TRANSFER OR ELECTRONIC TRANSFER. If the Buyer fails to comply to the demand for the monies, the Seller would then use Form 353-T TERMINATION OF CONTRACT (FORM 12-T– VACANT LOT/LAND) BY NOTICE TO BUYER FROM SELLER. Next, the seller may place the property back on the market to sell and speak to an attorney about the prospects of suing the Buyer for the Due Diligence and Earnest Money Deposit. If you have questions or comments regarding any information in this article, contact Regulatory Affairs at 919.719.9180.