May2011-Vol42-1

North Carolina Real Estate Commission

REAL ESTATE BULLETIN

Volume 42 • May 2011 • Number

NC Real Estate Broker

123 Any Street

Any Town, NC 27282

t’s time to renew your real estate license. e Commission’s Web site,

real estate broker’s permissible role

www.ncrec.gov, begins accepting online renewals - the fastest, most con-

in a short sale transaction and the

venient way to renew - on Sunday, May 15.

newly revised addenda to the standard res- e annual fee remains at $40, one

North Carolina Real Estate Commission

P. O. Box 17100

idential Oer to Purchase and Contract of the lowest in the nation. You may

Raleigh, NC 27619

form will be major topics of the 2011- charge your renewal with MasterCard,

2012 Real Estate Update Course. Visa or Discover.

ceptable for a real estate broker to provide

a broker price opinion and not risk violat-

ing North Carolina appraiser license laws,

pertinent issues in residential property

management, changes in the North Caro-

state and enter your license number and

PIN (personal identication number).

Your PIN - unless you have changed

it - will be the last four digits of your

Social Security number, which you have

already provided the Commission.

A conrmation will display upon ac-

ceptance of your renewal and you may

print and retain it for your records.

While on the Web site, update your

email, fax and residence addresses, if

needed, and check your continuing

education and postlicensing credit in-

lina Real Estate License Law that impact

licensees, resources relating to green build-

ing, and the requirements to maintain a

current, active license.

Given the increasing frequency of

short sale transactions, brokers should

develop a rm understanding of the

(See Update, page 5)

T HIS I

Y OUR

ORTH

C AROLINA R EAL E STATE L ICENSE

R ENEWAL N OTICE

formation to be certain they are correct.

(Allow 15 days after completing CE for

credits to be posted; the CE credits dis-

played on the label of this Real Estate

Bulletin are those posted as of April 29.)

If you choose to wait, remember,

your renewal must be received by us on

(See Renew, page 3)

Other topics will address when it is ac- On the Web site, go to Renew/Rein-

By Curtis Aldendifer, Associate Legal Counsel

ach year, the Real Estate Commis-

sion receives as many as 1,000 –

1,200 complaints against brokers from

consumers, and in some cases, other

brokers. Most are resolved without dis-

ciplinary action. Some go to hearing be-

fore the Commission, which may result

in sanctions ranging from a reprimand to

a license suspension or revocation.

Material facts fall into three gen-

eral categories: facts about the property

(leaky roof, cracked foundation, termite

infestation, water intrusion, the pres-

ence of mold, etc.); facts relating to the

property, such as zoning changes or the

Disclosure of Material Facts

e top ten complaints follow with

suggestions as to how to avoid mistakes

that may lead to disciplinar

y action.

construction of a major roadway nearby;

and facts that relate to a principal’s ability

to perform under the contract, such as

a pending bank foreclosure or short sale

situation.

Typical complaints of misrepresen-

tation involve advertising a property

for rent or sale with a greater number

of bedrooms than is permitted by the

property’s septic permit, or advertising

Elmer C. Jenkins

e Commission regrets the passing

of Elmer C. Jenkins of Blowing Rock.

He served on the Commission from

1987 to 1991 and was a former Vice

Chairman and Chairman.

a larger living area for the property than

was constructed pursuant to permit.

Complaints sometimes involve hidden

defects (cracked foundation or water in-

trusion resulting in mold) that were re-

vealed by an inspection performed by a

previous buyer.

To avoid complaints of misrepresen-

tation or non-disclosure of material facts,

you need to do your homework. Don’t

rely on information obtained from others

– verify it through reliable sources. Also,

check the accuracy of advertisements in

print, on the MLS, or at a Web site.

A broker’s duty to disclose material

facts extends to his or her client, and to all

parties involved in the transaction (includ-

ing the lender in a short sale situation).

(See Complaints, page 6)

REAL ESTATE BULLETIN

Published as a service to real estate licensees to promote

a better understanding of the Real Estate License Law and

Commission rules, and prociency in real estate practice.

The articles published herein shall not be reprinted or repro-

duced in any other publication without specic reference

being made to their original publication in the Commission’s

Real Estate Bulletin.

NORTH CAROLINA REAL ESTATE COMMISSION

1313 Navaho Drive

P. O. Box 17100

Raleigh, North Carolina 27619-7100

Phone (919) 875-3700

www.ncrec.gov

Beverly E. Perdue, Governor

COMMISSION MEMBERS

Marsha H. Jordan, Chairman Lincolnton

Benjamin Cone, III, Vice Chairman Charlotte

Melvin L. Alston Greensboro

Everett “Vic” Knight Raleigh

Jeffery J. Malarney Manteo

Jerry A. Mannen, Jr. Wilmington

Alice L. Mosteller Lake Junaluska

S. R. Rudd, Jr. Oak Island

M. Rick Watts Fayetteville

Miriam J. Baer

Executive Director

ADMINISTRATION

Mary Frances Whitley Director

Paula L. Ricard Financial Ofcer

Vickie R. Crouse Network Administrator

Wendy C. Harper Administrative Ofcer

Robert L. Forshaw Publications Ofcer

Brenda H. Badger Information Services Ofcer

AUDITS AND INVESTIGATIONS

Emmet R. Wood Director

Jennifer K. Boger Sr. Auditor/Investigator

William F. Dowd Sr. Auditor/Investigator

Bart H. Allen Sr. Auditor/Investigator

M. Spier Holloman Sr. Auditor/Investigator

Andrew Baker Auditor/Investigator

Pamela M. Vesper Auditor/Investigator

EDUCATION AND LICENSING

Larry A. Outlaw Director

Anita R. Burt Education/Examination Ofcer

Pamela R. Rorie Continuing Education Ofcer

Patricia A. Moylan Legal Education Ofcer

Lisa R. McQuillen Education/Licensing Ofcer

Matthew A. Wentz License Application Analyst

LEGAL SERVICES

Thomas R. Miller

Legal Counsel, Director; Special

Deputy Attorney General

Janet B. Thoren Assistant Director, Legal

Counsel

Charlene D. Moody Chief Deputy Legal Counsel

Curtis E. Aldendifer Associate Legal Counsel

Michael B. Gray Chief Financial Fraud

Investigator

D. Scott Schiller Financial Fraud Investigator

Stephen L. Fussell Sr. Consumer Protection Ofcer

Joan H. Floyd Sr. Consumer Protection Ofcer

Jean A. Wolinski-Hobbs Consumer Protection Ofcer

Peter B. Myers Information Ofcer

Elizabeth W. Penney Information Ofcer

Glenn M. Wylie Information Ofcer

Editor-In-Chief

Miriam J. Baer

Editor

Robert L. Forshaw

taff

pdate

People

Janet B. oren, Assistant Director,

Legal Counsel, Legal Services, has been

reappointed Special Assistant United

States Attorney for the Western District

of North Carolina.

To request a speaker from the

Commission, please submit the

“Request for Program Presenter”

form available on the Commission’s

Web site, www.ncrec.gov.

Appearances

Miriam J. Baer, Executive Director,

spoke to the Durham Regional Associa-

tion of Realtors® on changes to the Of-

fer to Purchase and Contract form and

legislative and compliance issues.

165 Years of Experience

Commission sta members with a total of 165 years of experience were honored

recently with awards for service. Shown (l. to r.) with Commission Vice Chairman B.

C. Cone, III, (left, front), are Charlene D. Moody, Chief Deputy Legal Counsel, ve

years; Pamela R. Rorie, Continuing Education Ocer, 15 years; Jean A. Wolinski-

Hobbs, Consumer Protection Ocer, ve years; Paula L. Ricard, Financial Ocer,

20 years; Daniel K. Creech, Information Specialist, ve years; Robert L. Forshaw,

Publications Ocer, 10 years; (l. to. r., back) Elizabeth W. Penney, Information Of-

cer, ve years; Susan M. Tysor, Executive Assistant, 15 years; Frances N. Johnson,

Senior Administrative Specialist, 25 years; Sammye G. Isenhour, Legal Assistant, 20

years; and Susanne H. Viens, Administrative Specialist, 15 years.

Real Estate Bulletin May 2011

alendar

ommission

Renew

(Continued from page 1)

or before ursday, June 30 (EDT).

Miss that deadline and your license will

expire eective July 1 and you must pay

a $55 fee to reinstate it before Decem-

ber 31. After that date, a new applica-

tion, background report, and fee are

required. You may also be required to

complete additional education or pass

June 8

All meetings, unless otherwise noted, begin at 9

July 1

a.m. and are held in Raleigh in the Commission’s

Asheville

Conference Room at 1313 Navaho Drive

(27609). Occasionally, circumstances necessitate

August 10

changes in meeting times and locations.

September 7

the license examination at the time of

the annual BICAR requirement.

reinstatement.

Once your license is “inactive”, you

e annual continuing education re-

cannot engage in brokerage activity until

quirement is eight hours, four of which

you take all required CE and submit the

are the mandatory, annual Update Course.

necessary paperwork.

e deadline for completing CE is June

So, be sure to take your CE and re-

10, after which no classes are available

new your license on time!

until after June 30. Incomplete CE af-

fects the status of your license - changing

it from “active” to “inactive” on July 1.

Brokers-in-charge are reminded of

COURSE SCHEDULES

This schedule provides locations, dates, and times for the courses indicated through December, 2011.

Broker-in-Charge Course

Two-days. Day one, 1-5 p.m.; Day two, 8:30-5:30 p.m.

Asheville August 10, 11

November 29, 30

Holiday Inn East/Blue Ridge Parkway

Banner Elk October 18, 19 Best Western Mountain Lodge

Charlotte July 19, 20

August 15, 16

October 4, 5

November 21, 22

Hilton Garden Inn, Concord

Greensboro September 12, 13

December 12, 13

Clarion Hotel

Kill Devil Hills September 19, 20 Ramada Plaza Resort

Raleigh July 11, 12

August 22, 23

October 6, 7

November 8, 9

December 5, 6

McKimmon Conference Center

Wilmington July 25, 26

October 24-25

Coastline Convention Center

Basic Trust Account Procedures Course

Charlotte August 16, 9 a.m. - 1 p.m. Hilton Garden Inn, Concord

Raleigh September 6, 1 - 5 p.m.

December 8, 1 - 5 p.m.

McKimmon Conference Center

Check Commission Web site to conrm dates, times.

Real Estate Bulletin May 2011

ith the decline

in the economy

over the last several years,

the “short sale” trans-

action has increased in

nancial circumstances

to conrm that his or

her resources are truly

insucient to cover

the loan amount. Ad-

Basic Short Sale Issues

By Charlene D. Moody, Deputy Legal Counsel

popularity. Licensees are listing a larger

number of “short sale” properties and

buyer-clients are seeking supposed bar-

gains.

Brokers and buyers must remember

that a seller is always free to sell their

property for less than the remaining

amount due on the seller’s mortgage

loan as long as the seller is able to come

to closing with the dierence in order to

extinguish the mortgage lien. In general,

that is known as a “short sale”, but it

does not require approval or participa-

tion by the seller’s lender. For purposes

of this article, a “short sale” transaction

occurs when the seller’s lender agrees

to extinguish the lien for less than the

amount due, allowing the seller to sell

the property free and clear of the mort-

gage lien but without paying o the full

balance due on the loan. ere are sev-

eral issues of which licensees should be

aware in order to avoid short sale pitfalls.

THE LENDER MAY RELEASE THE LIEN BUT STILL

HOLD THE SELLER LIABLE FOR THE REMAINING

AMOUNT DUE ON THE LOAN (THE “DEFICIEN-

CY”). Sellers in short sales must be made

aware that they may be on the hook for

any deciency and just because a bank

will allow the sale of the home does not

mean that they will be left without ow-

ing the debt. A lender may accept the

short sale amount and release the lien

but refuse to consider it a full and nal

settlement of the debt. Brokers working

with sellers should make certain the sell-

er determines whether or not the lender

will hold them liable for the deciency

before the short sale is completed. Con-

versely, if the lender agrees to forgive the

remaining debt, the seller may face tax

consequences because this debt forgive-

ness may be treated as income for tax

purposes. Finally, a short sale transac-

tion may aect the seller’s credit score

and ability to purchase another home

for a period of time. Licensees should

encourage sellers to discuss these issues

in detail with their attorney and tax ad-

visor before deciding to do a short sale.

An attorney may be able to assist an

owner in pursuing options other than

a short sale (such as a loan workout,

renance, deed-in-lieu of foreclosure,

bankruptcy, or loan modication).

SHORT SALE BECOME

AT WHAT POINT DOES A CONTRACT IN A

BINDING CONTRACT?A

e North Carolina Association of RE-

ALTORS® has created a short sale ad-

dendum for both the standard form

listing agreement and oer to purchase

and contract. When these forms are

used, lender approval is simply an ad-

ditional contingency to the contract. At

the point that both the buyer and seller

have signed the contract and the seller’s

acceptance has been communicated to

the buyer, the parties are in a binding

contract subject to the contingency of

the lender’s approval of the short sale.

Brokers representing sellers in a short

sale situation where the standard form

is NOT being used should advise their

seller clients to have an attorney review

the contract before they sign and be sure

the seller can be released if the lender

does not approve the short sale.

LENDER APPROVAL IS REQUIRED AND CAN

COMPLICATED. Each lender may have

dierent document and eligibility cri-

teria to determine whether a short sale

transaction will be allowed. Generally, a

lender will require proof that the bor-

rower is incapable of paying o the

loan and that the lender will fare bet-

ter through a short sale than through

the foreclosure process. Sometimes,

being upside down on the loan (ow-

ing more on the loan than current fair

market value) is enough, but the lender

may still choose to evaluate the seller’s

ditionally, all debt and costs must be

ascertained in order to determine the

feasibility of a short sale. ese debts

include the amount of the delinquent

loan, any home equity or other loans

recorded against the property, past due

HOA fees, and unpaid property taxes.

e costs of the sale include any agreed

closing costs (if allowed by the lender),

escrow fees, and brokerage commis-

sions. If a seller has more than one lien

against the property, a short sale may re-

quire the approval of other lenders.

BROKERS SHOULD TRY TO IDENTIFY POTEN-

TIAL SHORT SALE SITUATIONS PRIOR TO TAKING

THE LISTING TO AVOID SURPRISES ONCE THE

PROPERTY GOES UNDER CONTRACT. Listing

brokers must remember that it is a ma-

terial fact that a seller cannot complete

a transaction without doing a short sale

and this must be disclosed to a buyer

prior to contract even if the informa-

tion may harm the seller’s bargaining

position. Similarly, if the listing broker

learns a short sale is required after the

contract is signed, or if the property

goes into foreclosure while under con-

tract, the listing broker has a duty to in-

form the buyer. Brokers should also re-

mind sellers and buyers that short sales

are uncertain. A lender is not obligated

to approve a short sale transaction and

may choose not to involve the seller or

his listing broker in the decision-mak-

ing process.

SELLERS AND LISTING BROKERS SHOULD

BE ON THE LOOKOUT FOR SCAMS INVOLV-

ING SHORT SALES. ese may include the

buyer retaining a third party to negoti-

ate a short sale, requesting that the seller

execute a power of attorney for another

party or not contact the lender them-

selves, large upfront fees, and guaran-

(See Short Sale Issues, page 5)

Real Estate Bulletin May 2011

Short Sale Issues

(Continued from page 5)

tees to stop foreclosure. “Flopping” is

a newly coined word for certain scams

involving short sales. “Flopping” occurs

when a seller or buyer (and/or his bro-

ker) convinces a lender to accept a short

sale transaction while concealing from

the lender the fact that another oer at

a higher price is already lined up. e

buyer then quickly resells the property

for a prot. New regulations have been

created to prevent opping, including

90 day bans on resales.

LENDERS WHO AGREE TO A SHORT SALE

TYPICALLY TRY TO HAVE A SAY IN THE AMOUNT

BROKERAGE COMMISSION PAID AND MAYOF

NOT ALWAYS BE WILLING TO APPROVE A SHORT

SALE IF BROKERS TAKE THEIR USUAL FEE. Listing

brokers should be careful to accurately

represent the commission they will pay

to cooperating brokers and disclose that

the amount of compensation may be

adjusted based on the lender’s require-

ments for approval of the short sale.

BUYER BROKERS SHOULD ADVISE BUYER-CLI-

ENTS ABOUT THE PROCESS AND CONSEQUENCES

OF A SHORT SALE. A buyer broker should

remember that just because the asking

price of the property is below the payo

amount of the loan, there is no guaran-

tee that the property is worth even the

asking price. Brokers should take spe-

cial care in assessing value in declining

markets. In addition, a lender may not

consider a short sale until a contract has

been signed by buyer and seller. Once

the parties submit a contract, the lender

may take a long time to make a deci-

sion and may reserve the right to change

the terms at the last minute. Moreover,

a seller in a short sale transaction may

not be nancially able to make any re-

pairs so the transaction is likely to be

“as-is”. e listing broker is allowed to

continue marketing the property and

may receive other oers which must be

communicated to the seller and the sell-

er’s lender. Remember that the lender

has a nancial interest in the property

and is being asked to take less than the

amount owed. e lender therefore has

the right to full disclosure of all oers. If

another oer is more attractive in price

or terms, the lender may not approve

the rst contract and require the seller

to accept the later oer. Buyers must be

patient, willing to wait, and understand

that they could lose the property at any

time before closing.

In summary, short sales involve sig-

nicant risk to both sellers and buyers.

Sellers may face many nancial issues

before, during and after the closing.

e buyer must understand that not all

short sale are bargains, short sales are

generally not short transactions, and

just because the parties have signed a

contract does not mean that the buyer

will get the house. Brokers should be

well versed on these types of transac-

tions before engaging in a short sale and

should fully disclose all potential issues

to their clients.

(Continued from page 1)

limitations on services they may provide

to sellers and buyers to avoid the unau-

thorized practice of law. Issues relating to

short sales are discussed in this issue of the

Bulletin on page 4. A general discussion

of the topic appeared in the May 2009

issue of the Bulletin and may be quickly

accessed from the Commission Web site

search page by typing in “short sales” in

the Google search eld.

While the current year’s Update Course

addresses the January 2011 Standard

Form 2-T, Oer to Purchase and Con-

tract, the 2011-2012 Update Course will

discuss key addenda including the Back-

Up Contract, and the Contingent Sale,

Short Sale, and possibly Additional Pro-

visions addenda, as well as the Due Dili-

gence Request and Agreement.

Discussion of residential property

management issues will cover summary

ejectment actions and issues relating to

it and other recent changes in landlord-

tenant law.

e 2011-2012 Update Course will be

available as of July 1, to allow any inactive

licensee wants to reactivate their license to

rst complete necessary education.

Brokers who practice primarily in the

commercial arena are reminded that there

is a commercial version of the mandatory

Update Course usually available by Sep-

tember of each license year. All brokers,

without exception, must have either the

Real Estate Update Course or the “Real

Estate Update-Commercial” Course as

one of their two required continuing

education courses every year in order to

have a license on active status the fol-

lowing July 1.

2011-2012

BICAR COURSE

e Commission has asked sponsors

not to schedule the 2011-2012 BICAR

Course prior to August 2011 as no bro-

ker will need the class immediately. Any

broker, who loses BIC status or eligibility

as of July 1, should:

1) Do whatever is necessary to go

back to active status on Commission re-

cords; 2) Re-declare as a BIC by send-

ing Form 2.04; 3) Wait to receive a letter

from the Commission telling the broker

what special BIC education is needed

within 120 days of re-declaring as a BIC.

Do not take any special BIC education

until after you have ocially re-declared as

BIC by sending Form 2.04 to the Commis-

sion.

Real Estate Bulletin May 2011

(Continued from page 1)

Accounts

Mismanagement of Trust

e broker-in-charge is responsible

for the proper handling of funds belong-

ing to others, including the management

of the trust account and trust account

records. Although the broker-in-charge

may delegate trust accounting duties, he

or she remains ultimately responsible.

A broker-in-charge is responsible for

maintaining a monthly trust account

journal with a running balance, property

ledgers for each sale transaction or lease,

account reconciliations with bank state-

ments and journal on a monthly basis,

and a copy of the reconciliation work-

sheet with the trust account records. In

many instances, where trust account vio-

lations have occurred, the investigation

reveals that the broker-in-charge was not

properly supervising those charged with

bookkeeping duties, and was not regu-

larly (preferably monthly) reviewing the

trust account records.

A. Earnest Money Deposits -

Commission rules require that, in the

event of a dispute between a buyer and

seller or landlord and tenant regarding

the return or forfeiture of any deposit

held by a broker, other than a tenant se-

curity deposit, the broker must hold the

deposit in a trust account until a writ-

ten release from the parties authorizes its

disposition or until a court orders dis-

bursement. e rule applies even where

it appears clear to the broker that one

party has no valid claim to the deposit.

In lieu of retaining the disputed funds,

a broker may deposit the funds with the

Clerk of the Court at least 90 days after

notifying the parties claiming ownership

of the funds. ereafter, it will be up to

the parties to le a special proceeding

with the Clerk of the Court to determine

ownership of the funds. is procedure

is described in the Oer to Purchase

Disputed Deposits

Records must be retained for three

years after all funds held in trust have

been disbursed to the proper parties or

until the conclusion of the transaction,

whichever occurs later.

and Contract (Standard Form 2-T, rev.

1/2011) and enables brokers to educate

their clients regarding handling of dis-

puted deposits, and be less likely to face a

complaint about the funds’ return.

B. Tenant Security Deposits - Dis-

putes concerning the disposition of a

tenant security deposit are governed

by the Tenant Security Deposit Act

(“TSDA”), G.S. § 42-50 et.seq. When a

dispute arises between a tenant and land-

lord, a property manager should follow

the lawful directions of his or her client

(the landlord) and disburse the security

deposit accordingly.

e property manager is required to

refund the balance not retained by the

landlord to the tenant no later than 30

days following termination of the ten-

ancy, together with an itemized list of

damages charged against the security

deposit. If the extent of the landlord’s

claim against the security deposit cannot

be determined within 30 days following

termination of the tenancy, the property

manager must provide an interim ac-

counting within 30 days, followed by a

nal accounting and refund of the bal-

ance within 60 days of the termination

of the tenancy. ereafter, a tenant must

take the landlord to court to resolve the

matter.

Security Deposits

Charges Against Tenant

e TSDA sets forth the maximum

amount that may be imposed as a ten-

ant security deposit, depending upon

the duration of the tenancy, and further

limits the items that may be covered.

e deposit may not exceed an amount

equal to two weeks' rent if a tenancy is

week to week, one and one half months'

rent if a tenancy is month to month, and

two months' rent for terms greater than

month to month.

Items covered by the deposit include

non-payment of rent, water and sewer

service charges, damage to the premises,

nonfulllment of the rental period, un-

paid bills that become a lien against the

leased premises due to the tenant’s oc-

cupancy, costs of re-renting the premises

following a breach by the tenant, removal

and storage of property after an eviction

and related court costs. No other deduc-

tions are allowed.

e Real Estate License Law pro-

hibits brokers from drafting contracts,

contract provisions, or any other legal

documents, or from performing any oth-

er service constituting the practice of law

as dened by G.S. § 84-2.1. While a bro-

ker may assist a client in lling out the

standard forms approved by the N.C. Bar

Association and N.C. Association of RE-

ALTORS®, the broker must nevertheless

avoid inserting complex contingencies

into an Oer to Purchase and Contract

or addendum. If a transaction requires

more than can be inserted into the blanks

of a standard form, a broker should refer

the client to an attorney. Under no cir-

cumstances should a broker attempt to

alter or combine approved forms that

are not written to be used together. For

example, don’t combine an Oer to Pur-

chase and Contract form with a standard

residential lease form in an attempt to

create a lease-purchase contract. In ad-

dition to engaging in the unauthorized

practice of law, the broker will likely run

afoul of recent legislation imposing strict

requirements and restrictions on lease-

purchase option agreements. Parties in

lease-purchase transactions must be re-

ferred to private attorneys for document

Drafting Legal Documents

A short sale transaction constitutes

a material fact that must be disclosed to

potential buyers. For a detailed discus-

sion, see the article on short sales in this

issue of the Bulletin.

Short Sales

Two common complaints against

property managers involve charges for

items such as cleaning carpets and appli-

ances, and for re-renting the premises fol-

lowing a tenant’s breach. e TSDA per-

mits charges against the security deposit

for property damage, but not for “ordi-

nary wear and tear.” Lease provisions im-

posing certain cleaning requirements on

the tenant prior to vacating may not be

enforced by charging the TSD and could

require enforcement through a civil court

proceeding. Much of the confusion re-

lated to improper charges for property

damage can be eliminated by the proper

use of property condition checklists.

(See Complaints, page 7)

Real Estate Bulletin May 2011

(Continued from page 6)

Disputes Regarding

Contract Acceptance

preparation and guidance.

Negotiations leading to a contract

can be fast-paced, to the extent that

brokers nd themselves communicat-

ing oers and counter-oers, as well as

acceptances, orally. An example of such

a situation occurs when an oral counter-

oer is communicated to the buyers,

who orally agree to the new terms. e

acceptance is orally relayed to the sellers,

who now mistakenly think they have a

valid contract.

e Statute of Frauds requires that all

contracts for the sale of land or for lease

agreements exceeding three years be in

writing and signed by the parties to be

enforceable. In order for a valid contract

to exist, all negotiated terms must be in

writing and signed by the parties. Any

changes must also be in writing and ini-

tialed by the parties.

e Real Estate License Law pro-

hibits brokers in a transaction from act-

ing for more than one party without the

knowledge of all parties for whom the

broker acts. e most common com-

plaints deal with dual agency, seller sub-

agency, and special relationships between

the parties.

Conict of Interest

A broker can best keep his or her

clients informed of all communications

material to negotiations between the

parties by ensuring that oers, counter-

oers, and acceptances are in writing and

contain all necessary signatures. Oral

agreements for the sale of real property

are not binding.

With dual agency, an inherent con-

ict of interest exists because the broker

is representing both the buyer and seller

who have dierent and competing inter-

ests. To avoid a complaint of this type,

Commission rules require that a broker

provide a prospective client with the

Working With Real Estate Agents bro-

chure, and thoroughly review the types

of agency and the broker’s duties associ-

ated with each. e broker and prospec-

tive client must then agree as to whether

the broker will work as a seller’s agent,

a buyer’s agent, a seller’s subagent, or a

dual agent. To serve as a dual agent, the

broker must rst obtain written consent

from all parties to the transaction.

Where a broker is working with a

buyer who declines an agency relation-

ship, the broker must disclose that he or

she is working as the seller’s subagent,

and caution the buyer against revealing

any condential information. e seller’s

subagent can neither advise the buyer

nor advocate on his or her behalf.

A large number of complaints cite

the broker’s failure to communicate with

his or her client. In sales transactions,

sellers whose homes have remained on

the market for prolonged periods express

frustration at not being better informed

regarding the broker’s marketing strate-

gies. Buyers note the lack of communi-

cation from their brokers concerning

such matters as the outcome of property

inspections or the progress in short sales

of the lender approval process. Landlords

complain about not being kept informed

regarding marketing eorts to secure new

tenants or property maintenance issues.

But, by far the most frequent complaints

we receive from brokers and consumers

alike deal with the failure of other bro-

kers to return phone calls or e-mails.

Lack of Communication

Brokers should also beware of con-

ict of interest issues that may arise in

connection with the sale of the broker’s

own property. Although the broker is the

seller, a prospective buyer may assume

that the broker is representing the buy-

er’s interests. is is especially true where

the buyer had previously entered into an

exclusive agency relationship with the

broker prior to being shown the broker’s

listed property. Brokers are strongly dis-

couraged from showing properties they

own to buyers they represent. If neces-

sary, it is better to terminate the agency

relationship, refer the buyer to another

broker, and collect a referral fee, rather

than risk a conict of interest complaint.

As a duciary, it is essential that

you establish a method and frequency

of communication that is responsive to

your client’s needs and preferences. As

a broker, you should return telephone

calls, e-mails, and other electronic com-

munications promptly. If you are unable

to respond promptly, due to a vacation

or trip out of town, make sure that you

have a back-up person to handle your

calls in your absence and that you notify

your broker-in-charge and your clients.

Also, be sure to create an appropriate

voice-mail message or automatic e-mail

response to alert others trying to reach

Allegations of loan fraud often re-

sult from a broker trying to assist a buyer

who is having diculty qualifying for a

loan in the amount needed to purchase

a property. To help the deal close, the

broker lends the buyer money for closing

costs without notifying the lender. Alter-

natively, the seller may be asked to lend

or “give” the buyer some money without

telling the lender, since the lender has re-

fused to allow any seller nancing. Some-

times, the mortgage broker may ask the

parties to pass money to the buyer as a

“gift” outside of closing.

you.

Loan Fraud

1010

e rule of thumb is that any money

which passes between the parties and

third parties or even their brokers dur-

ing the course of the transaction must

be disclosed on the settlement statement

(even “extras” paid for by the buyer to

the builder over-and-above the contract

price). e reason is that such payments

may aect the loan-to-debt ratio used

by the lender to determine creditworthi-

ness. If you fail to disclose information to

the lender, you may be committing loan

fraud, which is a federal oense.

If in doubt as to whether a transac-

tion is being handled correctly, contact

an attorney or the Real Estate Commis-

sion.

Real Estate Bulletin May 2011

By Pamela R. Rorie, Continuing Education Ocer

n eager crowd of 218 real es-

tate instructors and school of-

cials from across the state attended the

Commission-sponsored 2011 Real Estate

Educators Conference in Raleigh, March

7-8, 2011.

Larry Outlaw,

Director of Educa-

tion and Licensing,

opened the confer-

ence with a sum-

mary of the signi-

cant revisions to the

2011-2012 North

Carolina Real Es-

tate Manual. Mr.

Outlaw also pre-

sented the updated

syllabi for the three

postlicense courses

tion presented its “Program of the Year”

award to George Bell for his continuing

education elective course, e NCAR

Residential Forms, and its “Educator of

the Year” award to co-honorees Cindy

Chandler and Garth Dunklin.

Commission Chairman Marsha Jordan (left) with award winners Cindy Chandler and

and gave a progress

report on the real estate license examina-

tion program.

Following Mr. Outlaw was a lively

agency disclosure discussion and role play

using the Working With Real Estate Agents

brochure presented by omas Mahlum,

DREI, with assistance from Kandyce El-

lis, Travis Everette, and Sam Pyrtle.

Another highlight of the morning’s

program was a joint presentation on the

new Oer to Purchase and Contract by

Miriam Baer, the Commission’s Execu-

tive Director, Tricia Moylan, Legal Edu-

cation Ocer, and George Bell, DREI

and member of the Joint Forms Com-

mittee. e trio discussed the history and

rationale for the contract changes, pin-

pointed potential problem areas regard-

ing the use of the new form, and gave at-

tendees the opportunity to ask questions

about teaching its use to licensees.

During the rst day’s luncheon, the

North Carolina Real Estate Educators

Association (NCREEA) held its spring

meeting under the direction of Presi-

dent Jo-Ann C. Lavecchia. Following the

business meeting, the traditional awards

presentation was ociated by Immediate

Past President Tim Terry. e Associa-

Garth Dunklin, and George Bell.

Also during the luncheon, Commis-

sion Chairperson Marsha Jordan pre-

sented the Commission’s Billie J. Mer-

cer Excellence in Education Award to

NCREEA’s Educators of the Year, Cindy

Chandler and Garth Dunklin. is

award is presented annually in memory

of former Commission member and

chairperson, Billie Mercer, who was espe-

cially dedicated to the cause of real estate

education. e names of all award win-

ners are engraved on the Mercer Award

cup that is displayed in the Commission’s

lobby. Commission members Everett

“Vic” Knight and Alice Mosteller also at-

tended the award presentation.

Executive Director Miriam Baer

Later in the day, Lisa McQuillen, Ed-

ucation and Licensing Ocer, informed

the group about the new online broker

license application process. Ms. McQuil-

len also reminded instructors and private

school directors about license renewals,

and recognized prelicensing schools and

instructors whose students had exhibited

outstanding performance on the license

examination.

Afterwards, Kristi Matthews of Ad-

vanced Energy pre-

sented Green and

Energy Efficient

Homes - What You

Need to Know, which

informed attendees

of requirements for

a home to be desig-

nated “green.” e

rst day’s program

concluded with

Pamela Vesper, Au-

ditor/Investigator,

who presented sug-

gestions for the elec-

tronic handling of trust accounts.

On the second day, Karen Hamil-

ton of the North Carolina Americans

with Disabilities Act Network discussed

ADA requirements when real estate pre-

license students and/or exam candidates

request special accommodations. Next,

Continuing Education Ocer Pamela

Rorie discussed proposed topics for the

2011-2012 Update and BICAR courses,

gave a status report on current continu-

ing education projects, and reminded in-

structors and CE sponsors of upcoming

renewal deadlines.

e conference concluded with the

highly anticipated “Miscellaneous Legal

Issues and Open Forum” session presid-

ed over by Commission Legal Counsel

Tom Miller, who outlined proposed leg-

islative changes and then took questions

on a variety of topics including broker

price opinions and short sales.

e Commission thanks North Car-

olina’s real estate educators for their con-

tinued interest and support, and congrat-

ulates Cindy Chandler, Garth Dunklin,

and George Bell for their achievements.

Real Estate Bulletin May 2011

Free Publications

Questions and Answers on:

Fair Housing

Tenant Security Deposits

Condos and Townhouses

Residential Subdivisions and Planned

Communities

Purchasing Coastal Real Estate

in North Carolina

Renting Residential Real Estate

Trato Con Agentes de Bienes Raíces

(Working With Real Estate Agents)

Preguntas y Respuestas sobre:

(Questions and Answers On:)

Vivienda Justa (Fair Housing)

El Depósito de Seguridad del

Inquilino (Tenant Security Deposits)

Alquiler de Inmuebles para

Viviendo (Renting Residential Real Estate)

Real Estate Licensing in North Carolina

(Contains license application)

Residential Property Disclosure

Statement (Available online)

Quantity

How To Order:

Online: www.ncrec.gov

Mail: NC Real Estate Commission, ATTN: Publications,

P. O. Box 17100, Raleigh, NC 27619-7100

Fax: 1-919-877-4227

This form for free

publications only.

NAME _____________________________________

ADDRESS __________________________________

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Please allow 7 days from

receipt of order for delivery.

How To Order:

Mail or fax this form. Credit card: MasterCard or Visa only. Please

do not remit cash.

Online: www.ncrec.gov

Select Publications on the Home page.

Fax: 1-866-867-3746

Mail to: Commission Publications, P. O. Box 28151,

Raleigh, NC 27611

This form for purchasing

publications only.

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Guidelines

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Working With Real Estate Agents

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Questions and Answers on:

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Earnest Money Deposts

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Real Estate Closings

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Offer and Acceptance

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Owning Vacation Rental

Property

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Broker-in-Charge Guide

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North Carolina Real Estate

License Law and Commission

Rules

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Real Estate Agent Safety Guide

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Real Estate Bulletin May 2011

Het

rick

Outlaw

Moylan

2011-

2012

Edition

ISBN 978-0-

9704907-5-9

2011-2012 Edition

NORTH CAROLINA REAL ESTATE MANUAL

˜ e North Carolina Real Estate Manual, published by the Real Estate Commission, is a

comprehensive reference addressing real estate law and brokerage practice, the North Carolina

Real Estate License Law and Commission rules. It serves as the authorized textbook for the

real estate broker postlicensing courses and is highly recommended for licensees, attorneys,

instructors and anyone else engaged or interested in real estate law and brokerage practice.

˜ e 992-page, 2011-2012 edition includes coverage of the revised HUD-1 Settlement

Statement and O° er to Purchase and Contract form, a new chapter on Brokerage Compensa-

tion Issues, and updated ÿ nancing legislation and practices.

˜ e ÿ les on the Web site and on disk are “READ ONLY” and may not be printed or changed.

North Carolina

ONLINE

Real Estate Manual

2011-2012 Edition

CD-ROM

SUBSCRIPTION

North Carolina

Real Estate Commission

P. O. Box 17100

Raleigh, NC 27619-7100

ISBN 978-0-9704907-6-6

www.ncrec.gov

˜ e Real Estate Manual on

Online subscriptions

CD-ROM provides digital,

permit online access to

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Also

the Manual and expire

available in

ument File format (PDF) which can be read

upon publication of a new edition projected

digital form:

by free Acrobat Readers across all platforms.

for late 2012. (Users of older computers may

prefer the CD-ROM for faster load

times).

Free access to Manual on Web site up to 5X. Register on Web site.

TO ORDER: Online at the Commision’s Web site, by mail, or fax. Credit cards accepted are MasterCard and Visa.

MAILING ADDRESS:

FAX:

MAIL:

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[email protected]

P. O. BOX 28151 CUSTOMER SERVICE:

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1-866-833-5785

Order Form

NORTH CAROLINA REAL ESTATE MANUAL

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QUANTITY ITEM PRICE* TOTAL

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North Carolina

Real Estate Manual

Real Estate Bulletin May 2011

enalties for violations of the Real Estate Law and Commission

rules vary depending upon the particular facts and circumstances

present in each case. Due to space limitations in the Bulletin, a complete

description of such facts cannot be reported in the following Disciplinary

Action summaries.

isciplinary

ction

CARROLL C. ANDERSON (Wades-

boro) – By Consent, the Commission sus-

pended the broker license of Ms. Anderson

for a period of six months eective April

1, 2011. e Commission then stayed the

suspension for a probationary period of six

months. e Commission found that Ms.

Anderson, while her license was under an

active suspension eective November 15,

2007 and permitted only to work as an un-

licensed assistant in the oce where she had

been broker-in-charge, spoke with several

buyers and at least one potential seller-client

about their transactions, leading the parties

to believe that Ms. Anderson was actively

licensed and acting as a broker.

LOIS W. BLACK (Wadesboro) – By

Consent, the Commission suspended the

broker license of Ms. Black for a period of

30 months eective September 1, 2010. Six

months of the suspension were active with

the remainder stayed for a probationary pe-

riod of 24 months. e Commission found

that Ms. Black, acting as dual agent for a

property listed at $44,900 in October 2004,

increased the price to $50,000 in March

2005; that property went under contract

with a buyer for $50,000, and closed at

$54,000; and that Ms. Black did not have

a written renewal or agreement to sup-

port the price increases. e Commission

also found that Ms. Black provided buyers

in two transactions with funds for closing

costs without disclosing this to the lender

and was repaid after the sales by the sellers.

Finally, the Commission found that a seller

in a transaction agreed to accept $4,500 in

settlement of $18,000 owed in seller nanc-

ing with Ms. Black’s rm collecting the pay-

ments and that the buyers were subsequent-

ly held liable for a demand of over $16,000

when Ms. Black’s ledger stated the amount

owed was $1,540.

JENNIFER JAYNE BRIGHT

(Mooresville) – By Consent, the Commis-

sion suspended the broker license of Ms.

Bright for a period of six months eective

April 1, 2011. e Commission then stayed

the suspension for a probationary period of

six months through October 1, 2011. e

Commission found that Ms. Bright in 2006

sold her own property and subsequently

Write

License

Your

Number

On All

Contracts

Disclosures

and

served as listing agent when the purchaser

sought to resell the home 10 months later at

a $45,000 increase in price; that Ms. Bright

included in her le disclosure and waiver

statements which were in dispute with oth-

er representations in a contract to purchase

and which the buyers had no memory of

signing. e Commission also found that

Ms. Bright denied being a dual agent and

claimed to represent only the seller despite

written agreement to the contrary in the

le.

CHIRICO HUBER PROPERTIES

LLC (Charlotte) – By Consent, the Com-

mission suspended the rm license of

Chirico Huber Properties for a period of

two years eective March 15, 2011. One

year of the suspension is active with the re-

mainder stayed for a probationary period

of one year. e Commission found that

a broker-owner of Chirico Huber Proper-

ties converted approximately $100,000 in

earnest money deposits and other funds in

the rm’s trust account to cover operating

expenses. e Commission noted that the

funds were replaced.

CLEAR WATER MARKETING LLC

(New Bern) – e Commission accepted

the permanent voluntary surrender of the

rm license of Clear Water Marketing ef-

fective March 11, 2011. e Commission

dismissed without prejudice allegations that

Clear Water Marketing violated provisions

of the Real Estate Law and Commission

rules. Clear Water Marketing neither ad-

mitted nor denied misconduct.

CHARLES N. COKER (Raleigh) – By

Consent, the Commission suspended the

broker license of Mr. Coker for a period of

three months eective March 1, 2011. e

Commission then stayed the suspension for

a probationary period of six months. e

Commission found that Mr. Coker, acting

through a company which developed and

sold condominium units, misrepresented

to potential purchasers the number of con-

dominiums that would be sold to investor-

purchasers and homeowner-purchasers.

e Commission found that a number of

purchasers bought condominiums believing

that only four or ve units would be sold

to investor-purchasers and that Mr. Coker

negotiated and sold 14 units to a single pur-

chaser who intended to lease the units to

tenant occupants.

KEVIN G. CONNER (Kitty Hawk)

– e Commission revoked the broker li-

cense of Mr. Conner eective November

12, 2010. e Commission found that Mr.

(See Disciplinary, page 12)

Real Estate Bulletin May 2011

Disciplinary Action

(Continued from page 11)

Conner failed to hold in a trust account

and to account for security deposits total-

ing approximately $3,400 he received from

a travel network rm. e Commission also

found that Mr. Conner failed to properly

maintain and produce the trust account re-

cords for a real estate brokerage rm, failed

to disburse trust funds to the true owners of

property in a timely manner; and failed to

safeguard the funds of others when he left

the oce of a construction and real estate

rm and abandoned the account and its

records. e Commission also found that

Mr. Conner operated a real estate brokerage

rm when he knew the rm did not possess

an active real estate brokerage license, col-

lected property management fees and dis-

bursed them to an account in the name of

a real estate brokerage rm and advertised

the rm’s services on the internet during the

time when the rm’s broker license was sus-

pended.

CONNER RESORTS, INC. (Kitty

Hawk) – By Consent, the Commission re-

voked the rm license of Conner Resorts

eective June 24, 2010. e Commission

found that Conner Resorts continued to

conduct real estate brokerage after its li-

cense was suspended in 2006. e Com-

mission also found that Conner Resorts

failed to maintain its trust account records

in compliance with the License Law and

Commission rules and failed to account for

the monies it held in trust for others.

LOY J. DELLINGER (Denver) – By

Consent, the Commission suspended the

broker license of Mr. Dellinger for a period

of two years eective January 1, 2011. One

month of the suspension was active with the

remainder stayed for a probationary period

of one year. e Commission found that

Mr. Dellinger pled guilty in Superior Court

to the class 1 misdemeanor of obstruction

of justice as the result of assisting a friend

in obtaining a North Carolina driver li-

cense when the friend was not entitled to

the same.

TABITHA E. ESTEP (Jonesborough,

Tennessee) – By Consent, the Commission

revoked the broker license of Ms. Estep ef-

fective March 10, 2011. e Commission

found that Ms. Estep, while serving in 2009

as a volunteer treasurer for the Avery Coun-

ty Fair and Avery County Little League,

used check cards from both organizations

to make unauthorized purchases, and pled

guilty to and was convicted of two counts

of felony embezzlement in Avery County.

Licensees Must

Report Convictions

Commission Rule A.0113

requires any licensee who is

convicted of a misdemeanor or

felony or who has disciplinary

action taken against him or her

by any occupational licensing

board to file a report with the

Real Estate Commission.

The reporting requirement

includes convictions for driving

while impaired (“DWI”). The

report must be filed within sixty

(60) days of the final judgment

or board action.

If you have questions about

this rule, please call the Com-

mission’s Legal Services Division

at 919-875-3700 for more infor-

mation.

e Commission also found that Ms. Es-

tep, while serving in 2009 as Finance Of-

cer for the Town of Beech Mountain, used

a credit card issued to Beech Mountain to

make unauthorized charges totaling in ex-

cess of $1,200 for her personal use. e

Commission further found that Ms. Estep,

in 2009, while serving as broker-in-charge

of a homeowners’ association, established

an account in the association’s name and

made unauthorized charges on the account

for her personal use. Finally, the Commis-

sion found that Ms. Estep’s Tennessee real

estate license was revoked in May 2010 due

to her failure to report her embezzlement

convictions and that she failed to report the

revocation to the Commission.

TERESA MARIA GRAVES GAYLE

(McLeansville) – e Commission revoked

the broker license of Ms. Gayle eective

February 21, 2011. e Commission found

that Ms. Gayle, acting as property manager

for a landlord-client, collected rental pay-

ments totaling $4,600 from tenants and

failed to remit the funds to her landlord-

client. e Commission also found that her

landlord-client eventually lost the subject

property to foreclosure when she could not

make her mortgage payments and led suit

and won a judgment against Ms. Gayle.

Finally, the Commission found that Ms.

Gayle failed to respond to Letters of Inquiry

from the Commission and to provide trust

account records.

STEPHANIE L. GOSEN (Monroe)

– e Commission suspended the broker

license of Ms. Gosen for a period of one

year eective January 25, 2011. e Com-

mission found that Ms. Gosen, acting as a

buyer’s agent, failed to remit or account for

an earnest money deposit received from the

buyer when contracting to purchase a prop-

erty. e Commission also found that Ms.

Gosen failed to properly maintain records

in the transaction, failed to make records

available for inspection by the Commis-

sion, and failed to provide full and accurate

disclosure of all information requested by

the Commission within the prescribed time

period.

PETER J. GREIJN (Raleigh) – By

Consent, the Commission suspended the

broker license of Mr. Greijn for a period

of three years eective March 1, 2011. e

Commission then stayed the suspension

for a probationary period of ve years on

certain conditions. e Commission found

that Mr. Greijn, broker-in-charge of a real

estate brokerage rm, bid at foreclosure

sales between 2002 and 2004 and then paid

potential upset bidders not to le upset bids

in violation of North Carolina law. e

Commission noted that Mr. Greijn has paid

restitution in the amount of approximately

$42,000 as required by the court in a civil

matter related to those sales.

MATTHEW F. HALL (Kitty Hawk) –

By Consent, the Commission revoked the

broker license of Mr. Hall eective June

24, 2010. e Commission found that, as

the qualifying broker and president of a

(See Disciplinary, page 13)

Real Estate Bulletin May 2011

Disciplinary Action

(Continued from page 12)

construction and real estate rm, Mr. Hall

converted approximately $20,000 held in a

trust account to his own use to pay a credi-

tor of the rm. e Commission also found

that Mr. Hall entered into a contract to pur-

chase a property from a buyer and the evi-

dence tends to show that Mr. Hall promised

the buyer that he would make a $10,000

earnest money deposit on the contract and

that the deposit would be held in his rm’s

trust account; the check Mr. Hall deposited

into his own trust account was returned for

insucient funds and Mr. Hall failed to dis-

close the dishonored check to the seller and

failed to make the deposit as promised.

BILLIE C. HOFFMAN (Mooresville) –

e Commission revoked the broker license

of Ms. Homan eective May 1, 2010. e

Commission found that a complainant al-

leged Ms. Homan failed to account for a

$1,000 tenant security deposit paid in con-

nection with a lease of commercial property

and that Ms. Homan failed to respond to

Commission inquiries about the complaint.

e Commission also found that Ms. Ho-

man failed to provide the Commission with

trust or escrow account records relating to

the transaction.

JOHN L. HUBER (Charlotte) – By

Consent, the Commission revoked the bro-

ker license of Mr. Huber eective March

15, 2011. e Commission found that Mr.

Huber converted approximately $100,000

in earnest money deposits and other funds

in his rm’s trust account to cover operating

expenses. e Commission noted that Mr.

Huber replaced the funds.

THOMAS B. HUMINIK (Charlotte)

– By Consent, the Commission suspended

the broker license of Mr. Huminik for a

period of six months eective December

1, 2010. ree months of the suspension

were active with the remainder stayed for

a probationary period of nine months. e

Commission found that Mr. Huminik gave

a broker associate a copy of a lender’s pre-

qualication letter from a previous transac-

tion and told him to change the information

on it to create a letter needed to support a

buyer’s oer in an unrelated transaction.

e Commission found that Mr. Huminik

was expressly authorized by the mortgage

lender to create pre-qualication letters, but

only when the lender had authorized pre-

qualication. e Commission also found

that Mr. Huminik failed to properly dis-

close a Driving While Impaired conviction

from 1997.

Receive Credit

Where and When

Credit is Due!

When continuing education

sponsors fail to report credits to the

Commission in a timely manner, li-

censees may nd themselves on

Inactive Status on July 1.

You can avoid this problem by

going online to the Commission

Web site, www.ncrec.gov, to verify

your CE credits.

JAMES MWIHIA KAMAU (Raleigh)

– e Commission accepted the permanent

voluntary surrender of the broker license of

Mr. Kamau eective March 11, 2011. e

Commission dismissed without prejudice

allegations that Mr. Kamau violated provi-

sions of the Real Estate License Law and

Commission rules. Mr. Kamau neither ad-

mitted nor denied misconduct.

SHARON M. LANEY (Carolina

Beach) – By Consent, the Commission sus-

pended the broker license of Ms. Laney for

a period of six months eective March 1,

2011. e Commission then stayed the sus-

pension for a period of two years on certain

conditions. e Commission found that

Ms. Laney, as broker-in-charge of a branch

oce of a real estate brokerage rm which

acted as rental agent for the owners of vaca-

tion and long-term rental properties, failed

to perform monthly reconciliations of the

security deposit and rental trust accounts

for a period of 120 days. e Commission

noted that bookkeeping for the business of

the rm was divided between the branch of-

ce and home oce.

LANEY REAL ESTATE CO. (Wilm-

ington) - By Consent, the Commission

suspended the rm license of Laney Real

Estate Co. eective April 15, 2011. e

Commission then stayed the suspension for

a probationary period of ve years through

April 14, 2016 on certain conditions. e

Commission found that on two separate

occasions in 2006, George Laney, a quali-

fying broker who managed and controlled

the business, wrote checks on his real estate

brokerage rm’s trust account for his per-

sonal real estate transactions without mak-

ing contemporaneous deposits. ese trans-

actions created temporary shortfalls in the

trust account that were not cured for several

weeks. e Commission also found in 2007

that Mr. Laney caused more than $23,000

in abandoned client monies from his rm’s

trust accounts to be disbursed without au-

thority from former clients to his rm’s

corporate account. Finally, the Commis-

sion found that Mr. Laney and others in his

rm, acting as rental agents for the owners

of vacation and long term rental properties,

failed in 2010 in one of the rm’s oces

to perform monthly reconciliations of the

security deposit and rental trust accounts

for a period of 120 days. e Commission

noted that Mr. Laney agreed to refund the

trust account and to follow the correct pro-

cedures for disbursing abandoned funds.

SETH ANTHONY LAWS (Wilming-

ton) – e Commission revoked the broker

license of Mr. Laws eective June 1, 2010.

e Commission found that Mr. Laws ne-

gotiated a written referral agreement for a

transaction while associated with one rm

and after leaving that rm, entered into a

written buyer agency agreement for the

transaction, agreeing with his new broker-

in-charge that the commission would be

paid to his former rm. e Commission

further found that Mr. Laws led the closing

attorney to believe that no sales commission

was to be paid to either rm and should be

paid as a credit to the buyer but instead in-

structed his buyer-client to pay him the full

$48,000 commission outside of closing.

JAMES M. LEWIS, SR. (West Paducah,

Kentucky) – e Commission revoked the

broker license of Mr. Lewis eective No-

(See Disciplinary, page 14)

Real Estate Bulletin May 2011

Disciplinary Action

(Continued from page 13)

vember 12, 2010. e Commission found

that Mr. Lewis permitted a real estate licens-

ee and licensed rm to operate, from the of-

ce of his company, an unlicensed property

management business and to charge and

collect property management fees from

consumers at a time when the licenses of the

licensee and the rm were both suspended.

HOWARD P. LOGUE (Sanford) – By

Consent, the Commission suspended the

broker license of Mr. Logue for a period of

one year eective December 15, 2010. One

month of the suspension was active with the

remainder stayed for a probationary period

of two years. e Commission found that

Mr. Logue maintained a trust account for

earnest money deposits and other monies

belonging to his brokerage clients and cus-

tomers, but failed to keep accurate records.

e Commission found that Mr. Logue’s

trust account records did not balance with

the statements provided by his bank, that

he did not regularly reconcile his records to

those provided by the bank, and that his re-

cords failed to make a clear audit trail. e

Commission also found that Mr. Logue’s

trust account records were signicantly out

of balance and that he failed to safeguard

the funds of others entrusted to his care.

TRUDY PARKER MASON (Trinity) –

By Consent, the Commission revoked the

broker license of Ms. Mason eective April

15, 2011. e Commission found that Ms.

Mason, acting as bookkeeper for a real estate

brokerage rm which acted as broker and

rental agent for owners of rental properties,

converted money belonging to clients and

tenants to her own use. e Commission

also found that Ms. Mason failed to safe-

guard and account for the funds of others

in her custody and that Ms. Mason pleaded

guilty to and was convicted of the oense of

embezzlement in 2010.

DAVID W. MCKINNEY (Greensboro)

– By Consent, the Commission revoked

the broker license of Mr. McKinney ef-

fective February 15, 2011. e Commis-

sion found that Mr. McKinney, acting as

broker-in-charge of a rm which provided

property management services for owners

of rental properties, failed to maintain cli-

ent- and tenant-owned money in a trust ac-

count, failed to promptly account for and

remit trust monies in his possession, failed

to keep complete and accurate records of

trust money, and failed to make records

available for the Commission’s inspection.

Your Pocket License Card

is your ticket for admission

to Continuing Education classes.

Allow at least 10 days to

process a replacement request

purchase and download

a replacement immediately

from the Commission’s Web site.

e Commission also found that Mr. McK-

inney’s and the rm’s liability for the funds

of others exceeded the money on deposit in

the rm’s trust accounts by at least $40,000.

MCKINNEY MANAGEMENT SER-

VICES, INC. (Greensboro) – By Consent,

the Commission revoked the broker license

of McKinney Management Services, Inc.,

eective February 15, 2011. e Commis-

sion found that McKinney Management

Services, a rm which provided property

management services for owners of rental

properties, failed to maintain client- and

tenant-owned money in a trust account,

failed to promptly account for and remit

trust monies in the rm’s possession, failed

to keep complete and accurate records of

trust money, and failed to make records

available for the Commission’s inspection.

e Commission also found that McKin-

ney Management Services’ liability for the

funds of others exceeded the money on de-

posit in the rm’s trust accounts by at least

$40,000.

OAK ISLAND ACCOMMODA-

TIONS, INC. (Oak Island) – By Consent,

the Commission suspended the rm license

of Oak Island Accommodations for a period

of one year eective February 15, 2011. e

Commission then stayed the suspension for

a probationary period of two years on cer-

tain conditions. e Commission found

that Oak Island Accommodations, a rental

property management rm responsible for

handling and accounting of the funds of

others, failed to oversee its trust account

and to reconcile the trust account records,

resulting in signicant discrepancies in the

reconciled balance, journal balance, and

property trial balance. e Commission also

found that Oak Island Accommodations’

trust account records were not maintained

in such a way as to create a clear audit trail.

OUTER BANKS CONTRUCTION

& REAL ESTATE, INC. T/A OBC REAL

ESTATE (Kitty Hawk) – By Consent, the

Commission revoked the rm license of

Outer Banks Construction & Real Estate

eective June 24, 2010. e Commission

found that Outer Banks Construction &

Real Estate continued to conduct real estate

brokerage after its license was suspended

in 2006. e Commission also found that

Outer Banks Construction & Real Estate

failed to maintain its trust account records

in compliance with the License Law and

Commission rules and failed to account for

the monies it held in trust for others.

DANILO PARRA, AKA DANILO

PARRA BERMUDEZ, AKA FERNAN-

DO PARRA BERMUDEZ (Reidsville) –

e Commission permanently revoked the

broker license of Mr. Bermudez eective

January 31, 2011. e Commission found

that Mr. Bermudez applied to become a real

estate broker in May 2005 and provided

personal information on his application in-

cluding a name, Fernando Parra Bermudez,

Social Security number, and date of birth,

all of which were false, and that his true

name was and is Danilo Parra Bermudez.

e Commission found that Mr. Bermu-

dez failed to disclose to the Commission on

his license application certain convictions

in 1987 of criminal oenses in the State

(See Disciplinary, page 15)

Real Estate Bulletin May 2011

Disciplinary Action

(Continued from page 14)

of New York. e Commission also found

that Mr. Bermudez was convicted in Rock-

ingham County on or about November 27,

2006, after being licensed by the Commis-

sion and under the name of Danilo Parra

Bermudez, of Driving While Impaired and

failed to report the conviction to the Com-

mission as required by Commission rules.

e Commission further found that the

name of Fernando Parra Bermudez and

other identifying information on Mr. Ber-

mudez’ driver’s license were false and that

this information was provided in July 2006

to become aliated with a real estate bro-

kerage rm. e Commission found that

Mr. Bermudez, as the result of an alterca-

tion on or about March 1, 2007 with the

rm’s broker-in-charge, was convicted un-

der the name Danilo Parra on or about May

23, 2007 of assault in Rockingham County.

JEFFERY A. PASSOT (New Bern) –

e Commission accepted the permanent

voluntary surrender of the broker license of

Mr. Passot eective March 11, 2011. e

Commission dismissed without prejudice

allegations that Mr. Passot violated provi-

sions of the Real Estate Law and Commis-

sion rules. Mr. Passot neither admitted nor

denied misconduct.

CYNTHIA J. PENNY (Raleigh) - By

Consent, the Commission suspended the

broker license of Ms. Penny for a period of

three months eective March 1, 2011. e

Commission then stayed the suspension for

a probationary period of six months. e

Commission found that Ms. Penny, en-

gaged by a company which developed and

sold condominium units, misrepresented

to potential purchasers the number of con-

dominiums that would be sold to investor-

purchasers and homeowner-purchasers.

e Commission found that a number of

purchasers bought condominiums believing

that only four or ve units would be sold to

investor-purchasers and that Ms. Penny was

aware that another broker with the com-

pany had negotiated and sold 14 units to a

single purchaser who intended to lease the

units to tenant occupants.

LEWIS L. PENNY (Raleigh) - By Con-

sent, the Commission suspended the broker

license of Mr. Penny for a period of three

months eective March 1, 2011. e Com-

mission then stayed the suspension for a

probationary period of six months. e

Commission found that Mr. Penny, en-

gaged by a company which developed and

sold condominium units, misrepresented

to potential purchasers the number of con-

dominiums that would be sold to investor-

purchasers and homeowner-purchasers.

e Commission found that a number of

purchasers bought condominiums believing

that only four or ve units would be sold to

investor-purchasers and that Mr. Penny was

aware that another broker with the com-

pany had negotiated and sold 14 units to a

single purchaser who intended to lease the

units to tenant occupants.

TONY PHAM (Charlotte) – e Com-

mission ordered the revocation of the bro-

ker license of Mr. Pham eective March

16, 2011. e Commission found that

Mr. Pham, who procured a tenant for the

owner of a rental property, prepared a lease

agreement which violated North Carolina

statutes by including in the agreement a

provision requiring the tenant to pay an ex-

cessive late rent fee of 10 percent of the lease

amount. e Commission also found that

Mr. Pham failed to respond to Commission

Letters of Inquiry resulting from the ten-

ant’s complaint within 14 calendar days.

DOUG POLLARD, INC. (Wrights-

ville Beach) - By Consent, the Commission

suspended the rm license of Doug Pollard,

Inc., for a period of two years eective April

1, 2011. e Commission then stayed the

suspension for a probationary period of

two years. e Commission found that in

September 2004, Doug Pollard, Inc., act-

ing as agent and broker for the owner of

nine properties, became aware that several

of its seller-client’s properties were involved

in foreclosure proceedings including one at

a particular address. e Commission also

found that Doug Pollard, Inc., in Octo-

ber 2004, learned that its seller client had

sold one of the properties and was refusing

to pay Doug Pollard, Inc., a commission.

e Commission found that immediately

following that closing, Doug Pollard, Inc.,

notied its seller-client in writing that it

would not provide any further services. e

Commission further found that Doug Pol-

lard, Inc. during the time of representation

of the seller-client, did not disclose to the

seller-client the names of other parties who

it also represented who purchased proper-

ties at foreclosure sales. e Commission

nally found that a company controlled by

Doug Pollard, Inc., bid successfully at the

foreclosure sale of the seller-client’s property

at a particular address and then assigned its

rights to one of the rm’s buyer-clients.

JAMES D. POLLARD (Wrightsville

Beach) – By Consent, the Commission

suspended the broker license of Mr. Pol-

lard for a period of two years eective April

1, 2011. e Commission then stayed the

suspension for a probationary period of

two years. e Commission found that in

September 2004, Mr. Pollard and his rm,

acting as agent and broker for the owner of

nine properties, became aware that several

of their seller-client’s properties were in-

volved in foreclosure proceedings including

one at a particular address. e Commis-

sion also found that Mr. Pollard in Octo-

ber 2004 learned that their seller-client had

sold one of the properties and was refusing

to pay Mr. Pollard a commission. e Com-

mission found that immediately following

that closing, Mr. Pollard and his rm noti-

ed their seller-client in writing that they

would not provide any further services.

e Commission further found that Mr.

Pollard, during the time of representation

of the seller-client, did not disclose to the

seller-client the names of other parties who

Mr. Pollard and his rm also represented

who purchased properties at foreclosure

sales. e Commission nally found that

the company controlled by Mr. Pollard and

his rm bid successfully at the foreclosure

sale of the seller-client’s property at a par-

ticular address and then assigned its rights

to one of the rm’s buyer-clients.

REFERRAL REALTY GROUP, INC.

– (Raleigh) By Consent, the Commission

suspended the rm license of Referral Re-

alty Group for a period of three years eec-

tive March 1, 2011. e Commission then

stayed the suspension for a probationary

(See Disciplinary, page 16)

Real Estate Bulletin May 2011

Disciplinary Action

(Continued from page 15)

period of ve years on certain conditions.

e Commission found that Referral Realty

Group, a real estate brokerage rm, engaged

in two transactions between 2003 and 2005

in which it represented sellers and failed to

disclose that it had business relationships

with the buyers and had a nancial interest

in the outcome of their transactions.

THEODORE SALAME III (Bakers-

ville) – By Consent, the Commission rep-

rimanded Mr. Salame eective February 1,

2011. e Commission found that Mr. Sal-

ame, acting as a buyer’s agent in a transac-

tion, was aware that payments by the seller

to the buyer totaling $616 could not be

credited on the HUD-1 closing statement

because of the type of loan. Mr. Salame also

knew that the seller paid the buyer the $616

after closing, resulting in an inaccurately

documented HUD-1 closing statement.

MICHAEL D. SHELTON (Stanley)

– e Commission accepted the voluntary

surrender of the broker license of Mr. Shel-

ton for a period of one year eective May 1,

2011. e Commission dismissed without

prejudice allegations that Mr. Shelton vio-

lated provisions of the Real Estate License

Law and Commission rules. Mr. Shelton

denied misconduct.

TRIANGLE REALTY CORPORA-

TION OF LOUISBURG (Louisburg) –

e Commission accepted the voluntary

surrender of the broker license of Triangle

Realty Corporation for a period of three

years eective March 20, 2011. e Com-

mission dismissed without prejudice al-

legations that Triangle Realty Corporation

violated provisions of the Real Estate Law

and Commission rules. Triangle Realty

Corporation neither admitted nor denied

misconduct.

JOSHUA C. VINCENT (Blowing

Rock) – By Consent, the Commission rep-

rimanded Mr. Vincent eective February

1, 2011. e Commission found that Mr.

Vincent, acting as broker-in-charge of a real

estate brokerage rm, failed to properly su-

pervise a bookkeeper who had access to the

48,000 copies of this public document were printed at a cost of .20 per copy

North Carolina Real

Estate Commission

P. O. Box 17100

Raleigh, NC 27619-7100

rm’s bank and trust accounts and removed

monies belonging to the rm, its principals

and its clients and converted them to per-

sonal use. e Commission also found that

Mr. Vincent failed to property maintain the

rm’s trust accounts and account records.

e Commission noted that Mr. Vincent

restored the more than $20,000 removed

from the rm’s trust accounts.

JENNIFER H. WILLIFORD (Golds-

boro) – e Commission accepted the

voluntary surrender of the broker license

of Ms. Williford for a period of three years

eective April 19, 2011. e Commission

dismissed without prejudice allegations that

Ms. Williford violated provisions of the

Real Estate License Law and Commission

rules. Ms. Williford neither admitted nor

denied misconduct.

FREDERICK O. YATES (Fayetteville)

– By Consent, the Commission suspended

the broker license of Mr. Yates for a period

of two years eective December 1, 2010.

ree months of the suspension were active

with the remainder stayed for a probation-

ary period of 21 months. e Commission

found that Mr. Yates acted as a buyer’s agent

in a transaction which failed to close; that,

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PAID

HICKORY, NC

PERMIT NO. 104

in connection with the contract, the buyer

wrote three checks: one for an earnest money

deposit written to the listing agent and two

with blank payee lines for Mr. Yates to des-

ignate the property payee; and that Mr. Yates

subsequently made both checks payable to

himself and endorsed them without deposit-

ing the funds in his rm’s trust account. e

Commission noted that Mr. Yates refunded

the buyer all monies including the original

$500 deposit, which was released to the seller

upon termination of the contract, and that

Mr. Yates has ceased performing credit repair

services for buyer-clients.

Clarication

In the March, 2011 issue of the

North Carolina Real Estate Bulletin it

was reported that broker Pamela Berry

approved the unauthorized disbursement

of more than $23,000 from the trust ac-

count of the real estate company where

she was associated. In fact, the money was

disbursed from the rm’s trust account to

its operating account during 2007 at the

direction of a broker-owner of the rm.

Following an audit by the Commission,

the money was restored to the trust ac-

count.

Real Estate Bulletin May 2011