License Law

Full and timely disclosure

"Full" disclosure includes a description of the compensation, incentive, etc. including its value and the identity of the person or party by whom it will or may be paid. The disclosure is "timely" when it is made in sufficient time to aid a reasonable person's decision-making. In a sales transaction, the disclosure may be made orally, but must be confirmed in writing before the principal makes or accepts an offer to buy or sell.

Prohibition against certain contract provisions:

- A broker acting as an agent in a real estate transaction shall not use a preprinted offer or sales contract form containing: 1) any provision concerning the payment of a commission or compensation, including the forfeiture of earnest money, to any broker or firm; or 2) any provision that attempts to disclaim the liability of a broker for his or her representation in connection with the transaction. A broker or anyone acting for or at the direction of the broker shall not insert or cause such provisions or terms to be inserted into any such preprinted form, even at the direction of the parties or their attorneys Commission-split agreements must be negotiated separately between real estate firms and such agreements may not be included by real estate brokers in an offer to purchase and contract

Procedures for imposing special assessments

- adopt a preliminary assessment resolution with required information about the project - issue notice of and hold a public hearing - adopt a final assessment resolution after public hearing directing that the public improvement project be undertaken in whole or in part - determine the costs of the project or improvement and issue a preliminary assessment roll containing: a brief description of each land parcel assessed, the basis of the assessment, the amount assessed against each parcel, the terms of payment, and the name of each property owner - Issue proper notice to the public and hold a second public hearing to confirm the preliminary assessment roll - deliver, once confirmed, a copy of the assessment roll to the county tax collector for collection in the same manner as property taxes The criteria for determining the amount of the special assessment include each or a combination of the following: • real property abutting the project at an equal rate per foot of frontage; • street frontage of the lots served at an equal rate per foot of frontage; • area of land served/benefitted by the project at an equal rate per unit of area; or, • value of land benefitted by the project.34

A lease

1) a contract between landlord (lessor) and tenant (lessee) that 2) conveys a nonfreehold estate in a real property. The tenant receives a right to legal possession in exchange for paying rent to the lessor. The central matters of possession and rent, a lease may contain other legally binding promises made by the lessor and lessee to each other.

Because a lease is both a conveyance and a contract, it gives rise to two sets of rights and duties between the parties:

1) those arising because of traditional property law rules, i.e., the privity of estate, and 2) those arising because of the express contractual promises of the lease, i.e., the privity of contract When a common-law property principle or a contract provision conflicts with state or federal law, the law governs and determines a residential tenant's rights and protections

Townhouses and Condominiums Distinguished

1. A townhouse unit owner owns the unit in severalty, i.e., the physical structure (subject to the existence of party walls) and the plot of land upon which the unit rests. A condominium unit owner individually owns only the enclosed space within the condominium unit. 2. The common areas of townhouse developments in North Carolina are owned by the home- owners' association, whereas the common areas of a condominium development are owned by all the condominium unit owners as tenants in common. 3. Contemporary townhouse developments most likely are subject to the statutory requirements of the Planned Community Act. Developments created prior to 1999 are subject to certain retroactive provisions of that Act. ere are fewer consumer protections available to purchasers and owners of townhouse units than there are for condominium purchasers and owners.

Headers

2 pieces of lumber joined to form a beam used to give extra support to wall frame where doors and windows are placed Spreads weight evenly around openings

Can a broker initiate a summary ejectment action and sign a coplaint on behalf of the owner whose property the broker is managing? The answer is "yes" if all of the following requirements are met:

1. The broker is an agent o the owner 2. The property management agreement authorizes the broker to initiate legal proceedings on behalf of the owner 3. The broker has actual knowledge of the facts alleged in the complaint.

Notice to Commission when BIC status ends

A BIC must notify the Commission in writing within 10 days upon ceasing to serve as BIC of a particular office. - exception for certain Subchapter S corporations.

A BPO or CMA may only estimate the "probable selling price" or "probable leasing price" of a property, not the "value" of a property. Moreover, if a BPO or CMA does propose to estimate the "value" or "worth" of a property, it shall be legally considered a "real estate appraisal" that may only be prepared by a licensed or certified real estate appraiser, not by a real estate broker.

A BPO or CMA provided for a fee must be performed in accordance with the requirements of Article 6 of the Real Estate License Law and standards set forth in rules adopted by the North Carolina Real Estate Commission. A BPO or CMA must be in writing and must address those matters specifically required by the statute or Commission rule.

The seller has no affirmative duty to disclose defects or other information about the property since he or she may choose "No Representation" for any item on the disclosure form.

A broker has an affirmative obligation to disclose to prospective buyers any material facts relating to the property that the broker actually knows or should reasonably discover through a "walk-through" inspection of the property.

Improper Brokerage Comission

A broker may NOT pay a commission or valuable consideration to any person for acts or services performed in violation of the License Law. This provision flatly prohibits a broker from paying an unlicensed person for acts which require a real estate license.

Offer

A broker working with a prospective purchaser usually assists the prospective purchaser in completing a preprinted offer to purchase and contract form expressing the terms the purchaser wants to propose to the seller. When the prospective buyer signs the completed form and it is delivered to the seller, the document becomes an offer.

Buyer Agent's Basic Statutory Duty

A buyer agent must explain to the buyer-client her or his right under this law to cancel any contract within three days of contract formation if the seller fails to provide the disclosure statements prior to or at the time the buyer makes an offer. A buyer agent should explain the disclosure law to the buyer before the broker begins showing the buyer properties so the buyer knows to expect and request the disclosure forms for each property.

Sewage Disposal Systems for Unimproved Property

A buyer should have the waste disposal system inspected if the property currently is or will be served by an on-site septic system. Unimproved Land. If the property is unimproved and does not have access to a municipal, county, or community sewage disposal system, the buyer should have the appropriate local health department determine whether the land is "suitable," "provisionally suitable" or "unsuitable" for an on-site septic system. e health department having jurisdiction over the property must determine that the property has suitable soils to accommodate a septic system and, if so, issue a permit before the property may be legally improved and a septic system installed. If the buyer is buying vacant land and plans to build on it, the buyer should promptly have an inspection by the county health department to con rm that the land is suitable for an on-site septic system, preferably a "conventional" septic system, during the due diligence period. Even if the vacant land being purchased is a lot in a subdivision, a buyer should always check with the county health department to assure that the lot has been approved for a septic system because the subdivision's developer may not have obtained approval of that lot for a septic system. Moreover, the buyer needs to determine the system's capacity (number of bedrooms the system can support) and any restrictions on the type of system that can be used. Subdivision approval is handled at the county and city levels in North Carolina and there is no state law requiring that developers have septic system approval of all lots prior to obtaining approval of the subdivision. us, subdivision approval may have been granted to the developer without advance approval of all lots (or any of the lots) for a septic system.

Wood-Destroying Insect Inspection

A favorable report is not a guarantee that there is no infestation; rather, it is a report that there is no visible evidence of wood-destroying insects and no visible damage from wood-destroying insects. Buyer pays for this inspection. The cost for extermination and structural repair of damage caused by these is negotiable between the buyer and seller. If the property is newly constructed, the seller must provide a new construction termite guarantee at his or her expense.

Operable Smoke and Carbon Monoxide Alarms

A landlord must: provide an operable smoke alarm in each residential unit provide a minimum of one operable carbon monoxide alarm per rental unit per level ensure that a carbon monoxide alarm is operable and in good repair at the beginning of each tenancy comply with statutory standards for providing and replacing alarm batteries comply with precise national minimum standards for replacement and installation of new alarms

Exception to BIC Requirement for Certain Firms

A licensed real estate firm is not required to have a BIC if it: 1. has been organized for the sole purpose of receiving compensation for brokerage services furnished by its qualifying broker through another firm or broker. 2. is treated for tax purposes as a Subchapter S corporation by the U.S. Internal Revenue service 3. has no principal or branch office 4. has no licensed or unlicensed person associated with it other than its qualifying broker

The amount of living area and other area in dwellings is based upon exterior measurements except for condominiums, which use interior measurements.

A one-hundred-foot-long tape measure is recommended for use in measuring the exterior of dwellings, and a thirty-foot retractable tape for measuring interior and hard-to-reach spaces. ** remember to add six inches for each exterior wall and interior wall that you encounter in order to arrive at the exterior dimensions

Realtor

A real estate licensee is a realtor only if he/she belongs to the national association of realtors, a private trade association

Summary Ejectment (Eviction Procedure)

A small claim action in district court for summary ejectment is the procedure by which most residential tenants are evicted. The complaint must be in writing, signed either by the landlord as plaintiff, the plaintiff's attorney, or an agent for the plaintiff who has actual knowledge of the facts alleged in the complaint. The law allows a property owner to file for summary ejectment whenever a tenant refuses to vacate the property after a demand to vacate and surrender possession of the property has been made in either of the following cases: - the tenant holds over after the lease term has expired - the tenant has done or omitted any act by which the estate has ceased according to the lease terms.

Tenancy by Entirety

A tenancy by the entirety is a form of concurrent ownership that is only possible between legally married spouses. North Carolina law presumes that any conveyance by deed or will to a legally married couple creates a tenancy by the entirety unless the conveyance expressly states otherwise

Townhouses

A townhouse development consists of a group of single family homes connected to another home by a common wall or walls. Each townhouse is individually owned. An entire group of townhouse unit owners may also be members of a homeowner association. If a townhouse development contains common areas, the association owns and maintains the common areas for the benefit of all. Townhouses typically exhibit a "row house style" of architecture with a group or row of two- to three-story units that are attached by common walls. A townhouse development may also be part of a common interest community. Unlike condominium ownership, townhouse ownership includes a deed to the tract of land on which the townhouse is located. e property boundaries typically include one or more common walls shared with an adjoining unit or units and may include a limited amount of yard space or an outside patio. In other cases, the homeowner's association will hold title to all land/space outside of the townhouse unit itself. Rules on the use and maintenance of townhouse common areas are set forth in restrictive covenants that run with the land and bind all individual townhouse owners. These covenants specify the common-area rights of individual owners, provide for regular payment of fees to the homeowners' association, and authorize periodic assessments against townhouse owners as needed.

Abandoned Property

Abandoned personal property of less than $500 is deemed abandoned five days after the time of execution of a writ of possession, and the landlord is authorized to throw away or dispose of it. Abandoned personal property of $750 or less, the landlord has the option to deliver the property into the custody of a nonprofit organization regularly providing free or at a nominal price clothing and household furnishings to people in need ( they are required to hold it for a 30 day period) ; this happens after the seven day period Abandoned personal property exceeding $750 will need to handled by the county sheriff

A broker working with a buyer, whether as a buyer's agent or a seller's agent, should assist the buyer in completing the due diligence process.

All brokers have the duty to discover and disclose all material facts to the buyer (and sell) act in a competent manner; avoid any undisclosed conflict of interest; avoid any improper, fraudulent or dishonest dealings, and otherwise comply with all applicable provisions of License Law and Commission rules, as well as the common law duty to treat third parties honestly and fairly.

Ranch/One Story

All one level/floor Easy Accessibility/maintenance Most expensive to build (roof and foundation spread across entire footprint)

Property Subject to Taxation

All real and personal property w/in NC is subject to taxation unless exempted by legislative or constitutional authority (Exemptions include nonprofits, religious, educational and charitable organizations)

Competence to Perform BPO/CMA.

Although Article 6 of the License Law and Section A.2200 of the Commission's rules do not specifically require a broker to perform a BPO/CMA in competent manner, the reader should remember that the License Law has always made incompetence a basis for disciplinary action and those provisions also apply to the performance of BPOs and CMAs. If a broker is not qualified by way of education and experience to properly utilize the appropriate methodology required for a particular property (for example, income capitalization for a commercial property), then the broker is expected to decline the assignment.

Realized Gain

Amount Realized MINUS Adjusted Basis

CMAs/BPOs Performed for NO FEE.

Any broker (non-provisional or provisional) has always been permitted to perform a BPO/CMA for any party when NO FEE is charged, and this continues to be the case under the revised law and rules. Note that the Commission does not consider compensation of a broker for general brokerage services under a brokerage agreement to constitute a "fee" under Article 6 of N.C.G.S. §93A. "General brokerage services" means services provided under a brokerage agreement to property owners in connection with listing/selling/leasing property and to prospective buyers or tenants in connection with purchasing or leasing a property. Such services include the provision by a licensee of a CMA or BPO. Similarly, the possibility of entering into a brokerage agreement (and earning a brokerage fee) does not constitute a "fee" when a licensee performs a CMA/BPO for a prospective client without charging a fee for the CMA/BPO. It is important for licensees to remember, however, that the Commission expects every CMA/BPO performed by a licensee to be performed in a competent manner and without any undisclosed conflict of interest, even if no fee is received for the CMA/BPO. Thus, as a practical matter, a licensee performing a CMA/BPO for no fee should still look to the standards described in Commission Rule 58A .2202 for guidance regarding the proper performance of a CMA/BPO.

Depreciation

Any condition which results in a loss of value of an improvement (never includes land) Real Estate Investors may deduct Value of Improvements /number of years depreciated) x years already taken 27.5 years for residential; 39 years for commercial

Discriminatory Practices

Any conduct by a licensee that violates the provisions of the State Fair Housing Act is considered by the Commission to constitute "improper conduct" and to be a violation of the License Law.

Business entities that must be licensed in order to engage in real estate brokerage:

Any corporation, partnership, limited liability company, association or other business entity (other than a sole proprietorship) must obtain a separate real estate firm broker license.

Standards for BPOs and CMAs Performed for Compensation.

Article 6 of the Real Estate License Law provides a number of standards that must be followed when a broker is performing a BPO/CMA for a fee. Additionally, the Commission has adopted rules (Section A.2200) setting forth specific standards for brokers when performing such standards. A broker performing a BPO/CMA utilizes the same valuation concepts and methodology as an appraiser performing an appraisal; however, the analysis associated with a BPO/CMA is less comprehensive and detailed than with an appraisal, and the regulatory standards for brokers performing BPOs/CMAs are less stringent than those required for real estate appraisers performing appraisals.

Dual Agency by Individual Agent

Authorizes individual agents representing both the buyer and seller in the same real estate sales transaction pursuant to a written dual agency agreement to include in the agreement a provision authorizing the agent not to disclose certain confidential information about one party to the other party without permission from the party about whom the information pertains.

Examples of addenda jointly approved by the NC Bar Association and the NC Association of Realtors include:

Back-Up Contract Addendum Contingent Sale Addendum New Construction Addendum FHA/VA Financing Addendum Seller Financing Addendum Loan Assumption Addendum LBP Hazard Addendum Additional Provisions Addendum Owners' Association Addendum Vacation Rental Addendum Short Sale Addendum

Brokers Should Verify Subdivision Approval

Before a real estate broker accepts a listing for a subdivided lot or lots, the broker should re- quest to see, and preferably have, a copy of the final approved and recorded subdivision plat. If there is no final recorded plat, the broker should meet with the seller and the seller's attorney to assure that offering the property for sale or lease can be accomplished in accordance with applicable law. e lack of proper subdivision approval can lead to serious consequences for buyers, the seller-developer, and any real estate broker involved in the sale of lots in an unapproved subdivision. Problems often come to a head when the lot buyer tries to obtain a building permit or a permit to place a septic system on the property.

Window Sill

Bottom of window frame

If the buyer breaches the contract, then the earnest money deposit is to be paid to seller as liquidated damages and as seller's sole and exclusive remedy for such breach except for seller's right to retain any due diligence fee and to seek compensation for any actual damage to the property caused by buyer or buyer's agent.

Buyer may sue seller for specific performance of the contract but the seller may not sue the buyer for specific performance or other damages if the buyer breaches.

Brokers in regard to on-site Septic tanks

Buyers should verify that the septic system will accommodate the number of people who will be living in the house. A real estate broker should not make any statement to a buyer regarding the adequacy of the septic system without first checking the septic permit. A broker working with a buyer may rely on the listing broker's representations regarding septic system capacity; however, should any question arise as to whether the represented number of bedrooms and/or occupancy is correct, the broker must verify the accuracy of the information provided by the listing broker.

Flooring

Carpet, tile, hardwood placed on top of subfloor

Footings

Concrete support forms the base for the foundation Footprint of the house Placed beneath soil line The bottom of each must be below frost line Lowest part of construction Distributes the weight of structure evenly

Top Plate

Connects walls to ceiling framing

The Real Estate Commission:

Consists of 9 members who sere three-year terms. Seven members are appointed by the Governor and two are appointed by the General Assembly upon the recommendations of the Speaker of the House of Representatives and the President Pro Tempore of the Senate. At least 3 members must be licensed brokers. At least 2 members must be "public members" who are NOT involved directly or indirectly in the real estate brokerage or appraisal businesses.

HUD minimum standards

Construction & design standards which apply to all homes financed with FHA or VA loans These standards may be stricter than local building codes Stricter Codes prevail

Common Examples of Other Damage

Crayon marks on walls Large holes in walls Broken windows Burned spots or stains on carpeting Bizarre or unauthorized paint colors Broken counter tops Filthy appliances (such as ovens or refrigerators) requiring extraordinary cleaning Exceptionally filthy premises (in general) requiring extraordinary cleaning Deductions may be made from a tenant security deposit to cover the expense of repairing damage NOT due to ordinary wear and tear that occurred during the tenancy

Frieze Board

Decorative board at the top of the exterior wall directly under soffit Protects against elements penetrating the joint between exterior wall and roof.

Assessments held in abeyance

Each owner of assessed property must pay the assessment in full within thirty days after published notice of confirmation of the assessment roll, unless the board of commissioners allows the assessment to be paid in installments. The property owner only has ten days after confirmation of the special assessment roll to file a notice of appeal to the appropriate court and must serve on the county, city, or town a statement of facts upon which the assessment appeal is based within twenty days after confirmation of the assessment roll. The appeal is then tried in court.

Requirement to have a Broker-in-Charge

Each real estate firm is required to have a broker designated by the Commission who meets the qualification requirements to serve as "broker-in-charge" of the firm's principal office and a different broker to serve in the same capacity at each branch office. This is not a separate license, but only a separate license category. No broker may be BIC of more than one office at a time, and no office of a firm shall have more than one designated BIC. There is one exception and that is when two or more firms share the same office space.

Allocation of Public Utility Costs

Electric service, natural gas service, water and sewer services. Public utilities law requires that service and meters for each individual apartment or dwelling unit be in the name of the tenant or other occupant, subject to the following exceptions: 1) Electrical or Natural Gas Service: - The landlord and tenant can agree in the lease that the cost of electric or natural gas service or both be included in the tenant's rent payments with the service in the name of the landlord - A landlord may apply to the Utilities Commission for a certificate of public convenience and necessity, authorizing the landlord to provide electric service using individually metered units in the lessor's name to allocate the cost of electric service among tenants when the lessor has a separate lease for each bedroom in the unit. 2) Water and Sewer Service: - Similarly, the Public Utilities Act permits landlords to apply for a certificate of convenience and necessity that allows the landlord to charge tenants for water and sewer services provided through the landlord's account.

Sewage Disposal Systems for Improved Property

Even for an improved property with an existing on-site septic system, it is important that a buyer ascertain the type of septic system (conventional or other) and verify the "improvement permit" issued by the health department to con rm the system's approval and determine the system's capacity. e capacity of a septic system is stated in terms of the number of bedrooms (assuming two persons per bedroom) that the system can support, and this should be noted on the permit. Use of the property by more than two persons per bedroom can overload the system and lead to failure. Should that happen, the health department can prevent further use of the system and, even if the system is repaired, impose lower limits on it use.

Improved Property.

Even for an improved property with an existing on-site septic system, it is important that a buyer ascertain the type of septic system (conventional or other) and verify the improvement permit issued by the health department to confirm the system's approval and determine the system's capacity. The capacity of a septic system is stated in terms of the number of bedrooms (assuming two persons per bedroom) that the system can support.

SUBDIVISION APPROVAL

Every subdivision of land affects the environment and thus the health, safety, and welfare of both future subdivision residents and members of the general public. State law authorizes counties and municipalities to regulate the subdivision of lands within their borders. Almost every area of the state is therefore subject to either county or municipal subdivision regulations. Subject to some exceptions, property owners who convey part of their land to another may be subject to subdivision regulations and must have at least preliminary approval of the subdivision by the county or municipality before selling lots. Brokers must understand that merely having a survey of the new lots prepared by a surveyor or engineer does not mean the subdivision has been officially approved by the proper government authorities.

Fair Housing Laws

Fair Housing act prohibits discrimination against a tenant or prospective tenant on the basis of race, color, religion, sex, national origin, handicap or familial status in the rental of residential property

Exterior Wall Coverings

First Layer - Sheathing which covers all exterior walls and roof, usually made of plywood or fiber board Wind and Moisture Barrier Final Layer - Siding (wood, brick, vinyl, stucco, etc)

Fascia Board

Flat board attached to the end of the eave Gutters are usually attached to these.

The contemporary practice is for the buyer to arrange for a new property insurance policy effective on the settlement date.

Flood Insurance is required when improved real estate is located in an area designated by the Federal Emergency Management Agency (FEMA) as a "special flood hazard area" and a government-insured mortgage loan is being made on the property.

Definition of Subdivision

For the purpose of subdivision approval ordinances, a "subdivision" is de ned by General Statute 153A-335 as "all divisions of a tract or parcel of land into two or more lots, building sites, or other divisions ... for the purpose of sale or building development (whether immediate or future) and includes all division of land involving the dedication of a new street or a change in existing streets." Certain combinations and recombinations of land and the division of land into parcels more than 10 acres each (if no street right-of-way dedication is involved) are not within the definition of "subdivision" for purposes of subdivision approval laws.

One & one half story

Functions like a 2 story, but upper level is underside of roof line - no attic space above.

Living Area Criteria; sometimes referred to as heated living area or heated square footage is space that is intended for human occupancy and is

Heated (permanently installed), Finished (with walls, floors and ceilings), Directly accessible from other living area (through a door or by a heated hallway or stairway), Attic [Note: if the ceiling is sloped, remember to apply the ceiling height criteria], Basement (or below grade) - defined as an area below the entry level of the dwelling which is accessible by a full flight of stairs and has earth adjacent to some portion of at least one wall above the floor level. A full flight of stairs is a flight of stairs connecting two main floors where the ceiling height for the lower floor is at least seven feet, except where ductwork provides a clearance of at least 6'4"; Bay Window (if it has a floor, a celing height of at least seven feet, and otherwise meets the criteria for living area; Bonus Room; Breezeway (enclosed); Chimney (if the chimney base is inside living area. If the chimney base is outside the living area but the hearth is in the living area, include the hearth in the living area but not the chimney base; Closets Iif they are a functional part of the living area; Dormers; Furnace Room; Hallways; laundry room/area; Office; Stairs (if they meet the criteria and connect to living area)

Girder

Heavy wooden or steel beam that runs across the top of the piers & supports the floor joists

Ridge Board

Highest element of the roof May include ridge vent for cooling

Sash

Holds the glass in a window

Window Frame

Holds the sash of a window

Floor Joists

Horizontal Supports attached to the sill and tied into the girders Run parallel to each other, spaced 16- 24" apart Support walls and floor

Muntins

Horizontal bars separating glass panes in a window

Economic Obsolescence

INCURABLE ONLY, caused by factors outside of property (proximity to polluting factory, train tracks) Environmental and External

If the seller breaches the contract, then all earnest money deposits are to be refunded the the buyer upon buyer's request, but ".. shall not affect any other remedies available to Buyer for such breach."

If Buyer elects to terminate contract due to seller's breach, buyer is also entitled to a refund of any due diligence fee paid, as well as reimbursement from the seller of the buyer's reasonable costs expended during the due diligence period and may pursue any other remedies she or he may have against the seller.

Tax Deductions

If you borrow more than this property is worth, the interest on the loan amount above this property's fair market value is not deductible from your federal income taxes. You should consult a tax advisor for more information.

Subdivision Streets Disclosure Laws

If a developer or grantor of lots in a subdivision created on or after October 1, 1975, intends to dedicate the subdivision's streets to public use, the developer must build streets that comply with North Carolina Department of Transportation standards. Prior to selling or conveying a lot, the developer also is required to supply the prospective buyer with a disclosure statement providing information about the street on which the property being sold fronts.37 e disclosure statement must fully disclose whether the street will be "public" or "private." If the street is dedicated public, the developer or seller must certify to prospective buyers that the street has been approved by the Division of Highways and that the street has been or will be constructed in accordance with state standards. Disclosure of additional information about subdivision streets also is required, depending on the nature and location of the streets involved. Who is responsible for maintaining the roads providing ingress and egress to a property is a material fact that brokers must disclose. Information as to whether subdivision streets are public or private is particularly important to prospective buyers, because street maintenance costs can be extremely high. If the streets will be private, then state law38 further requires the developer/seller to include in the disclosure statement an explanation of the consequences and maintenance responsibilities of the private street, to "fully and accurately disclose the party or parties upon whom responsibility for construction and maintenance of such street or streets shall rest ...," and to disclose that the street may not be constructed to minimum NCDOT standards sufficient to allow the State to assume maintenance responsibilities. It is critically important that brokers understand that the fact that streets are dedicated as "public" on the plat does not mean that a governmental entity has accepted responsibility for maintaining those streets. Brokers should at least ask the owner who is responsible for maintaining the streets that pro- vide access to any given property and to disclose that information to both prospective buyers and to lenders, particularly where there is no governmental maintenance responsibility. Real estate brokers should be very careful not to make unverified representations about the public or private maintenance of streets, regardless of the subdivision's age. Do not assume that public designation equates to governmental acceptance of maintenance and repair responsibilities. A real estate broker's duty to dis- cover and disclose is heightened when there are signs, such as the condition of the roads, which would lead a reasonable broker to question whether there is public maintenance. Where streets are designated as private, there should be some agreement for maintenance by someone, whether that is the original developer, the adjacent property owners, or an owners' association as a whole.

LBP Inspection

If a residential structure was built prior to 1978, the seller should have provided the buyer with the LBP disclosure form required by federal law

Well or Water Quality

If an unimproved property is not serviced by a water system and will need an onsite well to provide water to a planned building, a well permit must be obtained from the local health department.

All earnest monies are to be held by teh named escrow agent and credited to buyer at closing against the purchase price unless the contract is otherwise terminated

If buyer terminates prior to the expiration of the due diligence period, then all earnest money deposits are refunded to the buyer.

The agent must obtain a written buyer/tenant agency agreement from the client not later than the time either party to the transaction extends an offer to the other.

If the buyer will not sign a written buyer agency agreement prior to making or receiving an offer, then the agent may not continue to work with the buyer as a buyer's agent. Moreover, the agent may not begin at this point to work with the buyer as a seller's subagent unless the agent (1) fully advises the buyer of the consequences of the agent switching from the buyer's agent to the seller's agent (including the fact that the agent would have to disclose to the seller any information including confidential information about the buyer, that might influence the seller's decision in the transaction0, (2) obtains the buyer's consent, and (3) obtains the consent of the seller and listing firm, which is the seller's agent. This also applies equally to brokers working with tenants as a tenant agent.

Clearing of Title Defects by Seller

If the closing attorney discovers defefts in the seller's title that are not listed as exceptions in the sales contract, the defects must be cured by teh seller by the settlement date. The seller's existing first mortgage (deed of trust) will be paid in full by the closing attorney out of the sale proceeds at closing, as will any existing home equity loan (second deed of trust) the seller may have. Another common example of a title defect is a mechanic's lien filed by a provider of services for an unpaid balance due on recent construction, remodeling or repairs made to the seller's property. Even if there is no recorded mechanic's lien as of the settlement date, a mechanic's lien may be filed against the property after the closing, since a provider of materials or services may file the lien within 120 days after the last date services or materials were provided and the lien relates back to the first date services or materials were provided. Therefore, closing attorneys routinely require sellers to execute an affidavit as to mechanic's liens assuring the buyer, lender, and title insurance company that either (1) no labor, services or materials have been provided to the seller in connection with the property within the past 120 days or (2) certain specified labor, services or materials have been provided within the lien filing period, but each potential lien claimant has been fully paid and has signed a paid receipt for the work or materials or has otherwise waived in writing his lien rights.

Preparation for Assignment of Outstanding Leases

If the property being sold is currently rented to a third party, the outstanding lease must be assigned by the seller to the buyer. The seller will want to eliminate future liability to the tenants by complying with the Tenant Security Deposit Act -- which states the seller will be relieved of liability if he either transfers the security deposits to the buyer and notifies the tenants by mail of the transfer and the buyer's name and address or (2) returns the security deposits to the tenants The buyer and seller should agree on how this will be handled at the time they enter contract

Unimproved land.

If the property is unimproved and does not have access to a municipal, county or community sewage disposal system, the buyer should have the appropriate local health department determine whether the land is suitable, provisionally suitable or unsuitable for an on-site septic system. If the buyer is buying vacant land and plans to build on it, the buyer should promptly have an inspection by the county health department to confirm that the land is suitable for an on-site septic system, preferably a conventional septic system, during the due diligence period.

Tenants

If the seller previously has leased all or part of the real property being sold, that lease will be valid, even though oral, if it is for three years or less from the time it was made.

Contract

If the seller subsequently accepts the offer by signing the form and communicates the acceptance to the buyer, the buyer's offer coupled with communication of the seller's written acceptance create a completed contract binding both the seller and the buyer to the mutually agreed terms set forth in the written document.

Criminal Penalty for Selling Lots in an Unapproved Subdivision

In a county or municipality with a subdivision ordinance, no subdivided plat of land can be led with the register of deeds until final approval has been obtained from both the applicable planning board and the county commissioners or city council. Approval by the appropriate city or county board will be noted on the plat map that will then be accepted for recording by the register of deeds. Since January 1, 2006, owners and developers or their brokers may o er lots for sale or lease and enter into contracts once preliminary plat approval has been obtained as long as the contracts comply with state law.36 e contract must: 1. include a copy of the preliminary plat as an attachment and obligate the owner to deliver a copy of the nal recorded plat to the buyer prior to closing and conveyance; 2. "plainly and conspicuously" notify the buyer or lessee that the nal plat has not been recorded, that no governmental body incurs any obligation to the buyer/lessee regarding nal plat approval, that changes between the preliminary and nal plats are possible, and that the buyer/lessee may terminate the contract without breach "... if the nal recorded plat di ers in any material respect from the preliminary plat;" 3. not require the buyer/lessee to close earlier than ve days after the seller/lessor delivers a copy of the nal recorded plat to the buyer/lessee if there are no material di erences between the preliminary and nal plats; and 4. Allow the buyer/lessee to terminate the contract within (or does not require buyer/lessee to close sooner than) 15 days following delivery of the final recorded plat if there are material differences between the final and preliminary plat, in which case the buyer/lessee is entitled to a refund of all earnest monies or prepaid purchase monies.

Reporting Probable Selling/Leasing Price as a "Range"

In recognition of the fact that brokers performing BPOs/CMAs are not expected to be as precise in their analysis and adjustments to comparable properties as an appraiser when performing an appraisal, the Commision's rules permit reporting in a BPO/CMA of probable selling price or leasing price (lease rate) as either a single figure or as a price range. The applicable rules also states: "When the estimate states a price range and the higher figure exceeds the lower figure by more than ten (10%), the broker shall include an explanation as to why the variance is more than 10 percent.

Disputed Trust Funds.

In the event of a dispute between buyer and seller or landlord and tenant over the return or forfeiture of any deposit other than a residential tenant security deposit held by a broker, the broker shall retain said deposit in a trust or escrow account until the broker has obtained a written release from the parties consenting to its disposition or until disbursement is ordered by a court of competent jurisdiction

Non-Deductible

Insurance costs, HOA dues, repairs, capital improvements, appraisals, credit reports

The purpose of the disclosure requirement:

Is to place prospective buyers on notice that the agent they are dealing with is NOT their agent before the prospective buyer discloses to the agent information which the buyer would not want a seller to know because it might compromise the buyer's bargaining position.

Sellers must also provide a Mineral and Oil and Gas Mandatory Disclosure Statement (MOGMDS) to buyers prior to making an offer to purchase and contract.

It is a separate form and is in addition to the Residential Property and Owner's Association Statement. A disclosure statement is not required for some transaction

Seizure of Tenant's Personal Property (Distress and Distraint)

It is strictly prohibited. Lease provisions allowing a landlord to seize a tenant's personal property for nonpayment of rent are against public policy and void.

Earnest money is to be paid within five days of the effective date

It is to be deposited within three banking days from receipt. If it's received in cash, it must be deposited within 3 banking days regardless of contract formation.

Tenant's Statutory Duties

Keep the leased premises as clean and safe as conditions permit and cause no unsafe or unsanitary conditions in the common areas properly dispose of ashes, rubbish, garbage and other waste keep plumbing fixtures as clean as their condition permits not deliberately or negligently destroy, deface, damage or remove any part of the premises comply with obligations imposed by current building and housing codes be responsible for all damage to the unit other than deterioration caused by ordinary wear and tear, acts of the landlord or his agent, defective products supplied or repairs authorized by the landlord, acts of third parties not invitees of the tenant, or natural forces share duties with the landlord concerning the operation of smoke detectors and carbon monoxide alarms *except in an emergency situation, a landlord must notify a tenant in writing of any breaches of the above statutory obligations by the tenant.

Problematic Areas:

License required to receive compensation for referrals. One reason that lenders typically require a survey is to learn if the property is located in a FEMA designated flood hazard area. The Commission doesn't require brokers attending a closing to verify accuracy of every entry on the HUD-1 form. The Statute of Frauds makes an oral residential lease for more than three years unenforceable. Square footage of heated living area is usually determined based on exterior measurements A seller may lawfully choose "No Representation" for each item on the disclosure form, even if the seller has actual knowledge of property defects.

Reporting Criminal Convictions

Licensees are required to report to the Commission any criminal convictions for a felony or misdemeanor, any disciplinary action taken against them by any other occupational licensing board, or any restriction, suspension or revocation of a notarial commission within sixty (60) days of the final judgment or order in the case. This reporting requirement is ongoing in nature. Note that Driving While Impaired (DWI) is a misdemeanor and must be reported!

Special Assessment Lien

Like a property tax lien, a special assessment lien is a specific lien against the real property assessed and the lien transfers with the property. In terms of lien priority, a special assessment lien is inferior to all prior or subsequent liens for state, local and federal taxes, but is superior to all other liens. Because unpaid special assessments transfer with the property to a new owner, any thorough title search will include a check for outstanding special assessments, especially since property owners frequently are allowed to spread the payments over years.

Sill

Lowest horizontal wooden point Rests on top of foundation walls forming a base for the floor joists

Statute of Frauds

Makes an oral residential lease that's more than 3 years unenforceable

Deductible Gain

Max $250k if single / $500k if married filling jointly allowed only property is if primary residence for 2 of last 5 years

R-Value

Measures resistance to heat flow of insulation The higher the value, the more heat resisitant NC required values: Walls = 13, Ceilings = 38, Floors = 19

Common Covenant Declarations

Modern planned community covenants deal with myriad topics, including covenants that: • establish the property owners association and de ne its authority. • address the voting rights of each property owner. • define common expenses and annual and special assessments. • specify the architecture and minimum requirements of structures. (Often, covenants will require approval of construction plans by an architectural review committee.) • restrict the uses that can be made of property. ( e most common restriction is the sin- gle-family residential restriction,73 although planned communities can and often do have mixed uses in di erent areas.) • specify the consequences of property owners violating covenants. •make the entire set of covenants binding on successors and assigns of the original lot owner (covenantee). • state the period of time during which the covenants will be in e ect (for example, 25 years) with a provision for renewal by a vote of a specified percentage of the property owners. • establish standards for maintenance of homes, units, and lots by each owner.

Trust Money

Money belonging to others received by a real estate broker who is acting as an agent in a real estate transaction. It is also any money held by a licensee who acts as the temporary custodian of funds belonging to others. The most common examples of trust money are: • Earnest money deposits • Down payments • Tenant security deposits • Rents • Homeowner association dues and assessments, and • Money received from final settlements In the case of resort and other short-term rentals, trust money also includes: • Advance reservation deposits • State (and local, if applicable) sale

Two Story

Most economical (double space for 1/2 roof & foundation)

Wood Frame

Most popular & widely used method of construction in NC Offers flexibility in design Low cost, easy to insulate, takes minimal time to build.

Certificate of Occupancy

Must be issued before any building can be occupied.

Tax Deferred Exchange

No matter how much a property has appreciated since purchase, it may be exchanged for another property allowing tax payer to defer taxes on entire gain Applies to Vacation homes if owner occupies >14 days or 10% of rented days Properties must be exchanged, not sold. Does not apply to principal residence; only investment/income producing properties. Brokers should refer clients to tax advisor/ attorney

Victim Protection (protected tenant act) has three specific rights:

Nondiscrimination substantially based on the tenant's victim status The right to have locks on the unit changed - if perpetrator is not a tenant, tenant can request the locks to be changed and within 48 hours of receiving this request, the landlord must comply - if perpetrator is a tenant in the same dwelling -- tenant has to give notice to the landlord requesting the locks to be changed but tenant also must provide the landlord with a copy of the court order (without court order, landlord has no duty to replace the locks) The right to early termination of a rental agreement (30 days after providing the landlord with written notice of termination)

Nonresidents

Nonresident individuals and firms holding a NC broker and/or firm license and engaging in brokerage activity in NC are subject to the same requirements as NC resident brokers/firms with regard to when they must have designated broker-in-charge. Thus, a nonresident company engaging in brokerage in NC must have a BIC of the company who holds an active NC broker license for purposes of it's NC business, although the office need not be physically located in NC. Similarly, a nonresident NC broker sole practitioner engaging in activity that triggers the BIC requirement for a resident NC broker sole practitioner also must be designated as a BIC for NC brokerage purposes as without a BIC, a company has no office anywhere.

State law allowing early termination of lease in the event of foreclosure

North Carolina Law allows tenants who rent residential real property containing less than 15 rental units to terminate a rental agreement by providing the landlord with a ten-day notice of termination after the tenant has received notice of foreclosure

Permitted Uses of Security deposits

North Carolina law allows residential landlords and their agents to deduct amounts from a tenant security deposit only for the following purposes: 1. nonpayment of rent and costs for water, sewer, electric, or natural gas services provided by the landlord pursuant to state law 2. damage to the premises, including damage to or destruction of smoke alarms or carbon monoxide alarms, but excluding ordinary wear and tear 3. damages arising from nonfulfillment of the rental period (i.e. future rent due under the lease terms during landlord' diligent efforts to re-rent) 4. any unpaid bills that become a lien against the property due to the tenant's occupancy 5. Costs of re-renting the premises after breach by the tenant, including any reasonable fees or commissions paid by the landlord to a licensed real estate broker to re-rent the premises 6. costs of removal and storage of the tenant's property after a summary ejectment proceeding 7. Court costs 8. late fees for any rental payments more than five days late 9: complaint filing fees or court appearance fees only as permitted * a landlord may not keep any part of the deposit for damages caused by ordinary wear and tear

Death or Serious Illness of Previous Property Occupant

Not a material fact. Agents do not need to voluntarily disclose such a fact. If a buyer or tenant specifically asks about such a matter, the agent may either decline to answer or respond honestly. If a buyer or tenant inquires as to whether a previous owner or occupant had AIDS, the agent is prohibited by fair housing laws from answering such an inquiry because people with AIDS are considered to be handicapped under such laws and disclosure of the information may have the effect of discriminating against the property owner based on the handicapping condition

Convicted Sex Offender Occupying, Having Occupied or Residing Near a Property

Not a material fact. However, no seller or landlord may knowingly make a false statement regarding such a fact. Not required to volunteer to a prospective buyer or tenant any information about registered sex offenders. If asked, an agent need only answer truthfully to the best of his/her knowledge. In the absence of an inquiry, a buyer's agent will probably want to disclose the information in the interest of serving his or her client even though not required by law to do so. Seller's agent would probably want to check with the seller before disclosing as it probably wouldn't be in the seller's best interest. Any agent can also advise a buyer or tenant about how to check the sex offender registry online.

Standard Contract Forms

Offer to purchase and contract, standard from 2-T and the Guidelines for completing offer to purchase and contract, standard form 2-G Offer to purchase and contract - vacant lot/land, standard from 12-T and the Guideline for completing the vacant lot offer to purchase and contract, standard form 12-G Offer to purchase and contract - new construction, standard from 800-T and the guidelines for completing the new construction offer to purchase and contract, standard from 800-G

Taxable Gain

Sales price minus allowable closing costs, minus the adjusted tax basis

Covenants "Run with the Land"

Once restrictions are created in the deed to each lot owner, either by listing all restrictions or by referring to a master declaration of covenants duly recorded in the register of deeds once, the restrictive covenants "run with the land" and are binding on all subsequent purchasers of land in the particular sub- division.74 No subsequent purchaser or lot owner in the subdivision can use the land for any purpose that violates the restrictions. Any person who later acquires the land takes with legal "notice" that the land is subject to covenants that may impose conditions or limitations on the land's use.

Eave

Overhang on a sloping roof that extends beyond the walls of the house Elements include: Soffit, Fascia Board, & Gutters, Frieze Board

Restrictions on compensation disclosure requirement

Paragraph (e) clarifies that a broker does NOT have to disclose to a person who is not his or her principal the compensation the broker expects to receive from his or her principal, and further clarifies that a broker does NOT have to disclose to his principal the compensation the broker expects to receive from the broker's employing broker/firm (i.e., the individual broker's share of the compensation paid to the broker's employing broker/firm)

Curable Functional Obsolescence

Physical design features that are no longer considered desirable but can be corrected for low cost. (old plumbing, room layouts, outdated kitchens)

Easements & Encroachments

Physical inspection by the buyer may reveal the existence of possible encroachments or visible easements that have not been recorded and would not be revealed by a title search (i.e. neighbor's fence, driveway or structure actually encroaching on the property to be purchased -- indicating the need for a survey)

Tax Deductible Expenses

Points, Interest, Origination Fees, Taxes

Review of Restrictive Covenants and Governing Documents of any Homeowners Association

Preferably prior to making an offer, the buyer should obtain and review any subdivision restrictive covenants and homeowners association articles of incorporation, bylaws or regulations to learn the permitted property uses/improvements, construction and setback restrictions, rules for common area use, association dues and assessments, etc. This is especially important if the buyer intends to add structures (outbuilding, fence, pool, etc.)

Short Term Gain

Profit from sale of property held less than 12 months Taxed at ordinary rate (currently 39.6%)

Long Term Gain

Profit from sale of property held longer than 12 months Taxed at lower rate (currently 15%)

Capital Gain

Profit realized from sale or exchange of property

Adjusted Basis

Purchase Price (cost basis) plus Capital Improvements & Special Assessments minus monies received from an insurance company for a loss for selling an easement

Making false promises

Real estate brokers are prohibited from making any false promises of a character likely to influence, persuade or induce. The promise may relate to any matter which might influence, persuade or induce a person to perform some act he/she might not otherwise perform.

Curable Physical Deterioration

Repairs are possible and feasible and increase value Includes routine maintenance (painting, replaced roof)

Incurable Physical Deterioration

Repairs to major structural components which are not economically feasible (load bearing walls, foundations)

Real Estate Commission is authorized to:

Reprimand, censure, license suspension, and license revocation. It should be noted that licensees may be subject to the same disciplinary action for committing acts prohibited by the license law when selling, leasing or buying real estate for themselves, as well as committing such acts in transactions handled as agents for others. The Commission also has the power to seek in its own name injunctive relief in superior court to prevent any person (licensees and others) from violating the license law or commission rules. Example of when they might pursue injunctive relief if when an individual engages in real estate activity without a license or during a period when the license is suspended, revoked or expired. Any violation of the license law or commission rules is a criminal offense (misdemeanor) and may be prosecuted in a court of law. However, a finding by the commission that a licensee has violated the license law or commission rules does not constitute a criminal conviction.

General Contractor License

Required for any individual, partnership or corporation which contracts to construct a building for others when such construction costs exceed $30k. Must be licensed in NC

Laws protecting residential tenants

Residential Agreements Act Act Prohibiting Retaliatory Eviction Tenant Security Deposit Act Act prohibiting Self-Help Eviction Act Prohibiting Discrimination Against Tenants Laws Allowing Early Termination of Lease Laws Protecting Victims of Domestic Violence, Sexual Assault or Stalking Unfair and Deceptive Practices Act

RESTRICTIVE COVENANTS

Restrictive covenants are private deed restrictions that limit the use of real property. They are set forth in a Declaration of Restrictions and Covenants recorded in the Register of Deed's office. Modern restrictive covenants are extensive in scope and may dictate permitted property uses, setback and sideline requirements, minimum square footage, and architectural design. Lots in modern property developments are both bene ted and burdened by restrictive covenants. Because compliance with the covenants is not optional, all lots are considered "burdened," and restrictive covenants are considered an encumbrance on title. Each owner's lot is also bene ted by the restrictive covenants because each has the legal right to require other lot owners in the development to comply with all covenants.

Foundation Walls

Rests on top of Footings and provide the surface on which the floor is built. Typically 8-12" thick, concrete, brick or masonry block

Amount Realized

Sales price MINUS selling expenses

Self-help Eviction Prohibited

Self Help Eviction used to be changing the locks on the apartment door, padlocking an apartment, disconnecting the utilities, posting a false legal notice on the tenant's door. Now the only eviction remedy when residential tenancies are involved is in the procedure established by state law; self-help evictions by residential landlords are expressly prohibited.

Escrow Closing Method

Seller and buyer do not attend an escrow closing -- all documents necessary for settlement and closing are deposited with an impartial third party, known as the escrow agent or escrowee. One benefit of this is the relation back doctrine -- the deed will be treated as having been delivered for certain purposes when the seller gives it to the escrow agent

Building Codes

Set minimum standards of construction and design enforced statewide. Unpermitted construction cannot be advertised w/out full disclosure Strictest rules prevail

Power of Taxation

Shall be exercised in a just and equitable manner, for public purposes only, and shall never be surrendered, suspended or contracted away. The NC General Assembly has the exclusive power to levy taxes and to establish the method and procedure for the discovery, listing, and assessing of property for taxation. While the General Assembly regulates ad valorem taxation within constitutional guidelines, it is the county government that actually administers and collects the tax

Flashing

Sheet metal that wraps around any protrusion through a roof or wall (chimney, vent) Protects building from water seepage around opening

Jambs

Sides of window/door frames

Covenant

Simply defined, a covenant is an enforceable private promise that defines how land may and may not be used. It may be called any of the following term`s: covenant, restrictive covenant, equitable servitude, protective covenant, conditions and restrictions (CC&Rs), or restrictions. In modern usage, these terms all refer to a special type of private promise affecting land.

Types of windows

Sliding, Swinging, Double Hung, & fixed.

Rafters

Sloping members of a roof frame Connect ceiling joists and ridgeboards Support decking & other roofing materials

Septic System

Small sewer treatment system used when connection to major sewer system is not available. Waste discharged into the tank then converted into gas and liquid Excess liquid discharged into leach field Requires soil suitability test (Perc Test) to ensure proper leaching will take place. Soil Suitibility permit required by local health dept in NC Permit determines occupancy requirements Property cannot be advertised as having more bedrooms than permit allows (misrepresentation)

The Machinery Act

States "taxes levied on real and personal property (including penalties, interest, and costs allowed by law) shall be a lien on personal property from and after levy or attachment and garnishment of the personal property. A lien against real property attaches to the property itself and transfers with it.

Contemporary

Style of Home which uses open floor plans, skylights, windows, multilevel roof lines

Transitional Style

Style of home which blends traditional exteriors and contemporary elements inside.

Traditional

Style of homes: Think Colonial, Tudor, Victorian, French Provencial

Roof Styles

Styles include gable, flat, hip, saltbox, gable w/dormers, shed, mansard, gambrell Gable style of this is most typical in NC

Split Level

Takes advantage of uneven terrain w/ minimal grading

Real Property Tax

Taxes paid by homeowner which are deductible in the year paid (does not include interest paid on overdue taxes).

Buyer's Right to Cancel Contract

The Act gives the buyer a right to cancel a sales contract when either of the disclosure state- ments is not delivered in a timely manner, but in most transactions, the buyer's right to cancel for the seller's failure to timely provide the statements expires three days after contract formation. General Statute §47E-5(b) says if the statements are not delivered in a timely manner, the buyer may cancel upon the first to occur of four events: 1. The end of the third calendar day following the purchaser's receipt of the disclosure statement; 2. The end of the third calendar day following the date the contract was made; 3. Settlement or occupancy by the purchaser in the case of a sale or exchange; or 4. Settlement in the case of a purchase pursuant to a lease with option to purchase. A buyer who does not receive the required disclosure prior to extending an o er and chooses to cancel any resulting contract because of that failure must so notify the seller or the seller's agent in writing, either by hand delivery or by depositing the written notice into the United States mail, postage prepaid and properly addressed to the seller or the seller's agent. If the disclosure statements are delivered to the buyer prior to or at the time the buyer makes an offer, the buyer has no right under this law to cancel any resulting sales contract.

BIC Duties

The BIC is the primary person the Commission will hold responsible for the supervision and management of an office.

Listing Agent's Basic Statutory Duty

The Residential Property Disclosure Act specifically charges a listing broker with the duty to inform the owner of the owner's rights and obligations under this law. To fulfill this duty, the listing broker should do the following: 1. Advise the seller whether the seller has an obligation to provide prospective buyers with the disclosure statements in the particular transaction and, if so, perform the acts listed below. 2. Advise the seller of the seller's statutory duties. 3. Advise the seller that the buyer has a three-day right to terminate (rescind) a sales contract when the seller (or seller's agent) fails to deliver the disclosure statements to the buyer (or buyer's agent) prior to or at the time the buyer makes an o er. Also explain that the buyer has no recourse if the disclosure statements are delivered in a timely manner or if the buyer agrees that the Residential Property and Owners' Association Disclosure Statement is not necessary. While the parties may agree to waive the Residential Property and Owners' Disclosure Statement requirement, they cannot waive the seller's duty to provide the Mineral and Oil and Gas Rights Disclosure.

Settlement Meeting Method

The attorney coordinates the closing process, assures that all requirements of the contract and lender are met, prepares all legal documents and the settlement statements, records the deed and any deed of trust, and disburses funds. It's common for only one attorney to supervise and handle the entire closing process. A nonlawyer assistant acting under the direct supervision of an attorney may conduct the settlement meeting without the attorney being present Brokers ar strongly discouraged from attempting to act as a settlement agent. If they do, they will be held strictly accountable by the Commission for assuring that all aspects of the closing are handled properly and that the broker uses an attorney to perform all closing functions that require a law license. The commission split should be shown on the settlement statement.

Commingling Prohibited

The basic statutory provision relating to a licensee's handling of the money or property of others states that a broker may not "commingle" his or her own money or property with the money or property of others. This means that a broker may not maintain funds belonging to others in the same bank account that contains his or her personal or business funds. Funds belonging to others must be held in a trust account and, except as described below regarding "bank service charges on trust accounts," a broker may not deposit his or her own funds in that trust account.

Selecting the Closing Attorney

The buyer has the right to select the closing attorney. Usually, the closing attorney will represent both the buyer and the buyer's lender and will provide very limited services to the seller, such as preparing the deed. The seller may elect to have his/her own attorney but it's rarely done in residential transactions. A broker may recommend one or more attorneys as long as they are not receiving any referral fee and don't have any relationships with the attorney.

Broker's Responsibility for Closing Statements

The cited statute requires a broker, "...at the time a sales transaction is consummated, to deliver to the broker's client a detailed and accurate closing statement showing the receipt and disbursement of all monies relating to the transaction about which the broker knows or reasonably should know." The statute goes on to provide that if a closing statement is prepared by an attorney or lawful settlement agent, a broker may rely on the delivery of that statement, but the broker must review the statement for accuracy and notify all parties to the closing of any errors.

Settlement Date and Delays

The contract settlement date can be delayed by agreement of the parities, or in the absence of agreement, for a reasonable period of time unless the contract states that "time is of the essence" as to the settlement date or specifies that settlement delays will be handled differently. The NCBA/NCAR Standard Form 2-T allows the delaying party 14 days beyond the stated settlement date, if that party has been acting diligently and in good faith and notifies the non-delaying party. Any other delay must be agreed to by both seller and buyer to avoid the delay becoming a breach of contract by the delaying party

Expedited Eviction for Criminal Activity

The court is authorized to order the immediate eviction of a tenant where the court finds: -Criminal activity has occurred on or within the individual rental unit leased to the tenant - The rental unit leased to the tenant was used in any way in furtherance of or to promote criminal activity - The tenant or any guest of the tenant have engaged in criminal activity on or in the immediate vicinity of any portion of the entire premises - The tenant has given permission or invited a person to return or reenter any portion of the entire premises, knowing that the person has been legally removed by statue and barred from the entire premises or barred by the reasonable rules and regulations of a publicly assisted landlord - The tenant has failed to notify law enforcement or the landlord immediately upon learning that a person who has been removed and barred from the tenant's individual rental unit pursuant to this Article has returned to or reentered the tenant's individual rental unit

Accounting to the tenant

The deposit must remain in the escrow account until the end of the tenancy. At the end, the landlord must mail or deliver a written accounting to the tenant detailing how the tenant security deposit was disbursed. It must be mailed or delivered to the tenant within 30 days after termination of the tenancy. If the extent of a landlord claim against the deposit cannot be determined within 30 days, the landlord must provide an interim accounting within 30 days and a final accounting within 60 days. It must itemize any deductions from the deposit for damage Detail any deductions for unpaid rent or other permissible deductions Specify the balance of the deposit, if any, to be refunded to the tenant

Drafting of Sales contracts by agents prohibited

The drafting of contracts or contract forms for others is the exclusive domain of attorneys under the law. Thus, real estate brokers are prohibited by law from drafting real estate sales contract forms for others, as to do so constitute the unauthorized practice of law. The compromise: Real estate brokers are permitted to fill in or complete preprinted real estate sales contract forms that have been drafted by an attorney.

Most common practice is to have the meeting at the office of the buyer's attorney.

The first item of business is to review the settlement statement ; brokers should review with their clients, the closing attorney must collect all amounts due from the buyer, whether paid with a certified check or wire transfer or comparable method that guarantees payment. A lot of signatures are involved but the most important are the warranty deed transferring title from the seller to the buyer and the promissory note and deed of trust executed by the buyer in connection with the buyer's loan to finance the purchase. Funds will NOT be disbursed to anyone at the settle meeting.

Timetable for listing, tax lien and tax collection

The fiscal year for counties and municipalities in NC begins on July 1 and ends on June 30. Property must be listed between the first business day of January and the end of January. Taxes for the upcoming fiscal year are issued between July 1 and September 1 of each year and are legally due on the first day of September, but often are paid between September 1 and early January of the next year because there is no interest penalty until January.

Handling of Trust Money

The general rule is that all trust monies received by a licensee must be deposited in a trust account within three banking days of receipt. Exception: Earnest money received with offers to purchase and tenant security deposits in connection with leases must be deposited in a trust account not later than three banking days following acceptance of the offer to purchase or lease agreement unless the deposit is tendered in cash in which event it must be deposited within three banking days following receipt, even if the contract or lease has not been accepted.

Charges for routine house cleaning or routine carpet cleaning are not permissible deductions from a residential tenant security deposit unless the tenant promises to do so and then fails to do so.

The landlord must sue the tenant in court for damages related to the tenant's breach.

Examples of such personal or confidential information include:

The maximum price a buyer is willing to pay for a property, the buyer's ability to pay more than the price offered by the buyer, or the fact that a buyer has a special interest in purchasing the seller's property rather than some other similar property. The disclosure must be made prior to discussing with the prospective buyer his/her specific needs or desires regarding the purchase of a property. As a practical matter, this means the disclosure will always need to be made prior to showing a property to a prospective buyer.

Willful Omission

The occurs when a licensee has actual knowledge of a material fact and a duty to disclose such fact to a buyer, seller, tenant, or landlord, but deliberately fails to disclose such fact.

Mutuality of Obligations

The previous act specifies that obligations of a landlord and tenant under the rental agreement and state laws are mutually dependent - thus a breach of primary obligation under the act or rental agreement by the landlord excuses continued performance by the tenant. Early landlord-tenant law significantly favored the landlord in many ways, including subjecting residential tenants to the doctrine of caveat emptor. The act now supersedes the prior one-sided law in key areas, including placing a duty on the landlord to provide a residential tenant with a habitable place to live

Residential Agreements Act

The primary state legislation enacted for the protection of residential tenants; its central purpose is to require the rental of only "habitable" residential rental units. There is a statutory warranty of habitability. The Act "determines the rights, obligations, and remedies under a rental agreement for a dwelling unit" located in North Carolina. The term dwelling unit includes not only structures but also mobile homes and mobile home spaces and the grounds, areas, and facilities normally held out for the use of residential tenants. This act does not apply to commercial and industrial rentals, nor does it apply to transient occupancy in a motel, hotel, or similar lodging nor any dwelling furnished rent free. (simply labeling an apartment a hotel will not avoid application of the act). The tenant cannot waive his legal rights against the landlord under the Act. The "as is" provision is void and unenforceable. However, a tenant can contractually agree to make certain repairs to the premises; the tenant must be paid for these repairs and the tenant is obligated to make the repairs as agreed.

Use of Income Analysis Methodology Now Required Where Appropriate

The revised statutes eliminated the old Appraisers Act restriction that a broker's CMA for actual or prospective clients and for compensation was permitted only if the sales comparison approach was the only method used to derive an indication of the probable sales price. A broker performing a BPO or CMA to determine an estimated "probable selling price or leasing price" is now required to utilize methods involving the analysis of income where appropriate (i.e., income capitalization or gross rent multiplier methodology for income-producing properties) as well as the sales comparison method.

Resolution of Inspection/Repair Issues Related to Property Condition

The seller and buyer should resolve any issues related to the property's condition discovered during the buyer's due diligence inspections prior to expiration of the due diligence period; the seller is also not obligated to make any repairs

Time for and Method of Delivery of Disclosure Statements

The seller must deliver the disclosure statements to the prospective buyer no later than the time the buyer makes an o er to purchase, exchange or option the property, or exercises an option pursuant to a lease with an option to purchase. While delivery of the disclosure statements to a buyer's agent in a timely manner would satisfy the delivery requirement, the form must be signed by the buyer, not the buyer's agent.

Tax Lien SUmmary

The tax lien on real property attaches as of the first day of the listing period, even though the tax is not due until later in the year. The lien for taxes levied on a parcel of real property is a specific lien on that parcel. The lien for taxes levied on personal property is a general lien on all real property owned by the taxpayer in the taxing unit A lien for taxes levied on both real and personal property becomes effective against the taxpayer's personal property only after legal action has been initiated to seize or attach that property. When the tax lien attaches to the real property as of January 1, it does not become actionable until the following January, and then only if the taxes have not been paid. Understand, however, that the tax lien attaches to the real property itself and is enforceable against the property no matter who owns it.

Common Law Doctrine of Constructive Eviction

The tenant may invoke the common-law doctrine of constructive eviction if the premises are uninhabitable and the landlord is unable to unwilling to correct the problem. The constructive eviction doctrine allows a tenant to leave the leased premises and end the landlord and tenant relationship. A tenant arguing constructive eviction must establish the following elements: 1. A serious problem exists with the condition of the dwelling unit that makes the premises uninhabitable 2. The tenant has given notice to the landlord of the problem and requested that the landlord correct it 3. The landlord has failed to correct the problem within a reasonable period of time. 4. The tenant has moved out because the tenancy is uninhabitable

Assessed Value

The value of property established for ad valorem tax purposes, often referred to as the tax value.

The Residential Property Disclosure Act

Thee central requirement is that sellers of residential one-to-four-unit properties provide prospective purchasers with a "Residential Property and Owners' Association Disclosure Statement" and a "Mineral and Oil and Gas Rights Disclosure." The law does not require the seller to actually disclose any known information about the property's condition or whether the mineral, oil, and gas rights were severed from the property by a previous owner. With regard to whether the seller has knowledge of the conditions listed on the disclosure forms, the seller has the option of checking "Yes," "No" or "No Representation." Because the seller has the option to sell the property without making any representations as to the property's condition or as to the severance of mineral, oil, and gas rights by a previous owner, the North Carolina law is actually a voluntary disclosure law. However, it is mandatory that the seller provide the buyer with the disclosure statements, copies of which appear as Figures 8-1 and 8-2 at the end of this chapter.

Ceiling Joists

These are attached to the top plate of the wall and carry the weight of the roof.

Piers

These may be required to support flooring between foundation walls when a crawlspace/basement is used. Supports floor joists across the open span between foundation walls

Doors

These, when used in interiors, are often hollow core; when exterior, these are insulated and weatherproofed. Types include: Flush, panel, sliding glass & French

Itemized return

This must be used to take deductions

Willful Misrepresentation

This occurs when a licensee who has actual knowledge of a material fact deliberately misinforms a buyer, seller, tenant or landlord concerning such fact. A misrepresentation is also considered to be willful when a licensee who does NOT have actual knowledge of a matter material to the transaction provides incorrect information concerning such matter to a buyer, seller, tenant or landlord without regard for the actual truth of the matter (i.e, when a licensee intentionally provides information without knowing whether it is true and the information provided is in fact not true).

Safeguarding Trust Money; Improper Use of Trust Money.

This rule places on every licensee the responsibility to safeguard the money or property of others coming into his or her possession according to the requirements of the License Law and Commission rules. In addition, it states that: "A broker shall not convert the money or property of others to his or her own use, apply such money or property to a purpose other than that for which it was intended or permit or assist any other person in the conversion or misapplication of such money or property."

Other pre-closing matters:

Title search -- the attorney's search will reveal if the seller has good record title through the chain of conveyances, whether there are any outstanding encumbrances, deeds, contracts, deeds of trust, mortgages, judgments, tax or assessment liens, easements or other title defects that will prevent the buyer from getting that for which he bargained, namely, marketable and insurable title.

Procedures after the settlement meeting

Title update, document recording and funds disbursement. This typically happens the next business day after the settlement meeting. Closing isn't technically complete until the deed and deed of trust are recorded, as recognized by the definition of "closing" in standard form 2-T. Transmitting Documents to Lender and Buyer (all relevant financing docs including the original note and certified copy of the recorded deed of trust) to the lender. The original general warranty deed is commonly mailed to the buyer by the register of deeds office after it has been imaged into the document recording system. Income Tax reporting requirements: The seller's proceeds from the sale of exchange of real estate must be reported to the internal revenue service on an information return (IRS), Form 1099-S The closing attorney, as the settlement agent, has the primary obligation to file the 1099-S form reporting the seller's proceeds. IRS regulations assign responsibility as 1) the person responsible for the closing, 2) the lender, 3) the seller's broker, 4 ) the buyer's broker, or 5) the buyer. Information returns must be filed with the IRS between January 1 and February 28 of the year following the year of the sale. For any purchase from a non-resident seller - Form NC-1099NRS must be filed by the buyer within 15 days of closing.

Real Estate Commission's Purpose and Powers:

To protect the interests of members of the general public in their dealings with real estate brokers. Statutory Powers include: 1. Licensing real estate brokers and brokerage firms, and registering time share projects. 2. Establishing and administering prelicensing education programs for prospective licensees and postlicensing and continuing education programs for licensees. 3. Providing education and information relating to the real estate brokerage business for licensees and the general public. 4. Regulating the business activites of brokers and brokerage firms, including disciplining licensees who violate the License Law or Commission rules. Note: the Commission is prohibited from regulating commissions, salaries or fees charged by real estate licensees and from arbitrating disputes between parties regarding matters of contract such as the rate and/or division of commissions or similar matters.

Window Header

Top of a window frame

Final pre-closing procedures:

Transfer of earnest money from broker/firm to closing attorney (this may happen no earlier than 10 days prior to the scheduled settlement date) Arrange for Title Insurance: this is done so by the closing attorney and will be required if there is a lender involved. After closing, a final mortgagee's (lender's) policy will be issued to the lender -- common practice is for an owner's policy to be issued at the same time. The buyer pays a one time premium for both of these policies. Notify buyer of money needed to close -- the closing attorney will have prepared a draft of the settlement statement and will inform the buyer of the amount the buyer needs to bring as "certified funds" (certified or official bank check) Loan closing package and document review: includes instructions for closing the loan and the lender will transmit the loan funds needed by the buyer to the attorney; the principal loan documents are the promissory note and the deed of trust. The TRID rule requires the creditor/lender to give the "Borrowers Closing Disclosure" to the borrower at least three business days before the borrow consummates the loan, thereby providing the borrow with adequate time to review the loan terms and closing costs.

Incurable Functional Obsolescence

Undesirable physical design features which cannot be remedied easily. (offices which can't be air conditioned, 5 bedrooms 1 bath)

Bank Service Charges on Trust Accounts.

Trust accounts usually are subject to the same service charges as regular checking accounts. Whenever possible, brokers should arrange for the depository/bank either to bill the broker for these expenses or charge these expenses to the broker's personal or general operating account. However, if such arrangements cannot be made, the Commission will permit a broker to deposit and maintain in his trust account a maximum of $100.00 of his personal funds (or such other amount as may be required) to cover (not avoid) such charges. So, if a broker's monthly service charges and other fees typically are $100, then the broker may deposit up to $200 of his/her own money to cover these charges. A broker who deposits any of his/her own money in the trust account to cover bank charges must be careful to properly enter and identify these personal funds in his/her trust account records. While this technically constitutes "commingling," it is permissible commingling to avoid the greater evil of using other people's money to pay these bank charges.

Closing Methods

Two basic methods: the settlement meeting method and the escrow closing method (the settlement meeting method is used in the vast majority of real estate closings in NC

Appraisal

Two means: 1) an opinion or conclusion as to the value of property. 2) The process of developing and communicating an opinion of value

Foundation

Types include: Concrete slab, crawl space, basement, stacked stone (Not used in NC)

Real Property: Eight-Year and Four-Year Reappraisals

Under state law, real property must be reappraised in each county on a staggered schedule every eight years, although the board of county commissioners may adopt a resolution establishing a more frequent reappraisal cycle for that county, e.g., every four years Between these reappraisals, the tax assessor may increase or decrease the appraised value of real property to recognize changes in the property's value resulting from 1) the correction of a clerical, mathematical or appraisal error; 2) a conservation or preservation agreement; 3) a physical change to land or improvements thereon; or 4) a change in the legally permitted us of the property

Soffit

Underside of eave Usually has openings to ventilate attic space

Subfloor

Unfinished plywood or particle board placed on top of floor joists and girders Finished flooring is attached to this

Mullions

Vertical bars separating glass panes in a window

Studs

Vertical members of wall frame Finished wall coverings are attached to this. Insulation placed between studs Usually 2x4 spaced 16-24" apart

Security Deposit Limits

Week-to-week tenancy: Two weeks' rent maximum Month-to-month tenancy: one & one-half months' rent maximum Terms Greater than month-to-month: Two months' rent maximum

Limits on Late Payment Fee

When a tenant is five days or more late paying rent, the amount of a late payment fee is limited as follows: - rent due in monthly installments. Fee not to exceed $15 or 5% of the monthly rent, whichever is great. - Rent due in weekly installments: Fee not to exceed $4 or 5% of the weekly rent, whichever is greater

Debt-to-Income Ratio.

When determining the debt-to-income ratio, the projected debt (total monthly recurring obligations) includes the borrower's proposed monthly housing expense plus any recurring payments for outstanding debt or obligations that will remain after the loan has closed. Historically, qualify- ing guidelines stipulate a debt-to-income ratio in the 36-43% range, depending on the type of loan.

Housing Expense-to-Income Ratio.

When determining the housing expense-to-income ratio, sometimes called simply the "housing expense ratio" or "front-end ratio," the projected monthly housing expense includes not only the minimum required loan payment for principal and interest, but also projected costs for property taxes, hazard insurance, flood insurance, private mortgage insurance, special assessments, and homeowners association dues, if applicable. Not all loans will have each of these payment elements, but if applicable to the subject property, these amounts will be included as a projected housing expense. Historically, qualifying guidelines stipulate a housing expense-to-income ratio in the 28-32% range, depending on the type of loan.

Appraisal

With residential loans involving a lender, the lender selects the appraiser, the buyer pays for the appraisal and the appraisal report is sent directly to the lender by the appraiser.

Elements of Roofs

Wood Sheathing Shingles Tar paper/weatherproofing Eave Ridgeboard

Closing

a legal process that culminates in the transfer of title from seller to buyer; virtually all real estate closings in NC are conducted by attorneys - however, real estate brokers are obligated to assist buyers and sellers with the entire sale transaction, including performing "pre-closing" tasks to prepare for settlement

Ad valorem property tax

a tax levied on the property literally "according to its value"

Addendum (something added in latin)

an addition to the contract that must be carefully selected for appropriateness, competently completed by the broker, and appended to the contract.

Special Assessment

an individual charge against certain real property that is benefited by a local improvement such as a sidewalk or street. (i.e. water systems, sewage collection, disposal systems, water resources development projects, beach erosion control or flood and hurricane protection works, watershed improvement projects and drainage projects; improving streets and street lighting)

A survey is not rquired

but is advisable if there are any questions about boundaries, area, encroachments, easements or any other matter discoverable by a survey

Landlord's Statutory Duties

comply with current building and housing codes make repairs and keep the tenancy in a fit and habitable condition keep common areas in a safe condition maintain in good and safe working order and promptly repair all electrical, plumbing, sanitary, heating, ventilating and air conditioning systems provide operable smoke detectors and carbon monoxide alarms and perform other duties with regard to those systems notify a tenant if the landlord receives notification that a water system the landlord charges a tenant for exceed s a maximum contaminant level repair any imminently dangerous condition within a reasonable period of time based upon the severity of the condition

Sole plate

connects walls to sub floor lowest point of wall frame

Tax Rate

derived by dividing the revenue needed from the ad valorem property tax by the total assessed value of property in the taxing unit, whether county or city; the tax rate must be established no later than July 1, the first day of each new fiscal year.

The Residential Rental Agreements Act

expressly prohibits a landlord from disconnecting either the landlord-provided water/sewer service or the electric service due to a tenant's nonpayment. In addition, any payment overdue in costs owed by a tenant for water or sewer services or electric service cannot be used as a reason to terminate the lease. Any payment to the landlord shall be applied first to the rent owed and then to charges for electric service or water or sewer service, unless otherwise designated by the tenant. Although it may not be used to terminate the lease, nor may the landlord withhold rent to cover the pay however they can take it out of the security deposit at the end of the lease.

North Carolina Machinery Act

governs the topic of ad valorem property taxation in NC -- describes property subjects to and exempt from taxation, standards for appraisal and assessment, matters concerning the listing of property, duties of tax officials, review and appeal procedures, levy of taxes, collection of taxes, and tax liens and their foreclosure. It also establishes a system for the formal appeal and review of tax listings and valuations

Violation of unfair or deceptive practices act

if a violation of the residential rental agreements act by a landlord is also an unfair and deceptive business or trade practice, then the tenant who has suffered damages because of the landlord's violation can recover treble damages (three times the actual damages)

A landlord

is an owner of real property, who agrees to rent all or part of the property to a tenant

Personal Property

is listed and appraised annually for taxation purposes. Personal property not used to produce income or for a business purpose may be exempt as "non-business property" which includes household furnishings, clothing, pets, lawn tools and lawn equipment but excludes motor vehicles, mobile homes, aircraft, watercraft or engines for watercraft. The Machinery Act requires that the value and ownership of personal property be determined as of January 1.

A "mill"

is used to express the tax rate -- it is 1/1000 of a dollar (1/10 of one cent)

A broker

may NOT prepare a BPO (or CMA) for an existing or potential lienholder or other third party where the BPO is to serve as the basis to determine the value of a property for the purpose of originating a mortgage loan, including first and second mortgages, refinances or equity lines of credit.

Roof Pitch

measurement representing slope of roof equals number of inches of rise per foot of horizontal distance The larger the rise, the steeper the roof

Straight Line

method to apply depreciation taken in equal amounts over the assets useful life

The current standard form

not only continues the "time is of the essence" requirement as to payment of any additional earnest money deposit, it also specifies acceptable modes of payment: cash, official bank check, wire transfer or electronic transfer.

Review of zoning and other matters affecting the property that are subject to government regulation

planned property use - check county/city zoning and subdivision covenants; check adjacent property zoning if it is undeveloped; Roads and schools -- check if a subdivision's streets are public or private.

Other inspections:

radon & asbestos

Basis for Determining Amount of Special Assessment

real property abutting the project at an equal rate per foot of frontage street frontage of the lots served at an equal rate per foot of frontage area of land served/benefitted by the project at an equal rate per unit of area; or, value of land benefitted by the project

A broker working with a buyer is expected to

recognize red flag situations relating to possible violations of zoning, restrictive covenants, or building permit requirements that warrant further inquiry and to assist the buyer in checking into such situations.

Tenant Security Deposit Act

regulates and protects the security deposits of residential tenants. It applies to any person, firm, or corporation renting or managing a residential dwelling unit or units on a weekly, monthly, or annual basis. Brokers are subject to the Act whether leasing residential property they own or is owned by others. Requirements include the following: - All residential tenant security deposits must be held in a properly designated trust or escrow account in a federally insured depository or trust institution authorized to do business in North Carolina, or the owner-landlord must furnish a bond in the amount of the deposit from a licensed insurance company authorized to do business in NC - Within 30 days of the tenancy, the landlord must notify the tenant of the name and address of the depository institution where the landlord has deposited the tenant's security deposit or the name of the insurance company providing the bond. - Where the owner has hired a licensed real estate broker to manage the property and collect the rents and other monies, the broker does not have the option of obtaining a bond but must deposit all monies received from the tenant into a trust or escrow account maintained in accordance with NC License Law and Commission rules. The tenant must be notified in writing if the security deposit is transferred to an account at a different bank

The North Carolina Good Funds Settlement Act

requires the settlement agent (closing attorney) to 1) verify funds paid to the settlement agent by the buyer, lender, or other party for the transaction and 2) record the deed and deed of trust prior to disbursing any funds. After verifying available funds, the closing attorney must update the title search, record the deed and deed of trust, and only then may disburse funds to the seller, brokers, and any other payees as noted on the settlement statement.

BROKER PRICE OPINION AND COMPARATIVE MARKET ANALYSIS

the North Carolina Appraisers Act both define a "broker price opinion" ("BPO") and a "comparative market analysis" ("CMA") as "...an estimate prepared by a licensed real estate broker that details the probable selling price or leasing price of a particular parcel of or interest in property and provides a varying level of detail about the property's condition, market, and neighborhood, and information on comparable properties, but does not include an automated valuation model." Thus, the terms "BPO" and "CMA" have exactly the same legal meaning even though an estimate provided for a seller or buyer client or prospective client is most commonly referred to as a CMA and an estimate performed for a third party for a purpose other than mortgage loan origination (for example, a foreclosure or short sale decision) is typically referred to as a BPO.

Pet Fee

the act does permit the landlord to require a separate reasonable and nonrefundable fee for pets kept by the tenant on the premises.

Requesting Designation as a BIC

the broker who is to serve as BIC of an office is responsible for requesting his or her designation by the Commission using the form required by the Commission.

Act Prohibiting Retaliatory Eviction

the eviction of a tenant by a landlord in response to the assertion by the tenant of a legal right, is prohibited. Residential tenants (and other persons in residence) are protected by law when engaging in good faith in specified protected activities. Protected activities of tenants: Complaining to a government agency Requesting repairs by the landlord Exercising legal rights under the lease Exercising rights under federal or state law Becoming involved in a tenants' rights organization If a landlord tries to evict a tenant within 12 months after the occurrence of a protected tenant activity, the tenant can raise the defense of retaliatory eviction.

Where the landlord has materially breached the Act, the tenant is entitled to general damages for any period of the tenant's occupancy during which the premises were uninhabitable. General damages are measured by the following formula:

the fair rental value (FRV) of the unit as warranted minus the fair rental value (FRV) of the unit in its unfit condition.

Brokers representing sellers should be mindful that if the transaction fails to close after the expiration of the due diligence period because the buyer fails to perform --

the only monies the seller will receive are any sums paid as the due diligence fee and as earnest money deposits. Sellers should also keep in mind that if the buyer timely exercises his/her right to terminate the contract, the only compensation the seller will retain is the due diligence fee

Market Value

the price estimated in terms of money at which the property would change hands between a willing and financially able buyer and willing seller, neither under any compulsion to buy or sell and both having reasonable knowledge of all the uses to which the property is adapted and for which it is capable of being used.

Assessment

the process of determining property value for the purpose of ad valorem taxation

Parties attending the settlement meeting may include

the sellers, the buyers, the closing attorney and/or a nonlawyer assistant supervised by the closing attorney, the listing real estate broker, and the selling real estate broker. Buyers in a residential transaction usually attend the settlement meeting, while the seller's presence may be optional as long as they have provided the closing attorney with all necessary documents The listing broker and selling broker should attend the settlement meeting

The standard contract most commonly used in NC for the sale of residential real estate is called an offer to purchase and contract

this may also be referred to by a number of different descriptions or shorthand terms, such as real estate sales contract, purchase contract, earnest money contract, or binder (but most frequently - sales contract)

Imminently Dangerous Condition

unsafe wiring, flooring or steps, ceilings or roofs, or chimneys or flues lack of potable water lack of operable locks on exterior doors broken windows or lack of operable locks on all ground-floor windows lack of adequate heating facilities lack of operable toilet, bathtub or shower rat infestation resulting from structural defects excessive standing water, sewage, or flooding problems caused by plumbing leaks, or inadequate drainage that contributes to mosquito infestation or mold

A "non-provisional" broker

with a current license on "active" status may prepare a broker price opinion (BPO) or comparative market analysis (CMA) for a fee for a variety of persons and entities for a variety of reasons, not just for actual or prospective brokerage clients. Note, however, that a provisional broker may NOT perform a BPO or CMA for a fee for anyone.

Examples of Damage due to ordinary wear and tear

worn or dirty carpeting faded or cracked paint dirty windows dirty walls frayed or broken curtain on blind strings leaking faucets or toilets small nail holes in walls (from hanging decor) worn lavatory basin burned-out range heating elements

Transactions Exempt from the Mineral and Oil and Gas Rights (MOG) Disclosure.

• Transfers involving the first sale of a dwelling never inhabited. • Lease with option to purchase contracts where the lessee occupies or intends to occupy the dwelling. • Transfers between parties when both parties agree not to complete a Residential Property and Owners' Association Disclosure Statement.

Other prohibited acts:

1. Where a licensee has obtained a license by false or fraudulent representation (e.g., falsifying documentation of prelicensing education, failing to disclose prior criminal convictions, etc.) 2. Where a licensee has been convicted of, or pled guilty or no contest to, a umber of listed misdemeanors or felonies plus any other offense that shows professional unfitness or involves moral turpitude that would reasonably affect the licensee's performance in the real estate business. 3. Where a broker's unlicensed employee who is exempt from licensing (property management exception), has committed an act which, if committed by the broker, would have constituted a violation for which the broker could be disciplined. 4. Where a licensee who is also licensed as an appraiser, attorney, home inspector, mortgage broker, general contractor, or another licensed profession or occupation has been disciplined for an offense under any law involving fraud, theft, misrepresentation, breach of trust or fiduciary responsibility, or willful or negligent malpractice.

Sole proprietor shall designate himself or herself as a broker-in-charge if the broker:

1. engages in any transaction where the broker is required to deposit and maintain monies belonging to others in a trust account. OR 2. engages in advertising or promoting his or her services as a broker in any manner (includes placing an ad for his services as a broker in any form or any medium; distributing business cards indicating he is a real estate broker, orally soliciting the real estate business of others, or listing a property for sale (which inherently involves holding oneself out as a broker and advertising) OR 3. has one or more other brokers affiliated with him or her in the real estate business Note however, that maintenance of a trust account by a broker solely for holding residential tenant security deposits received by the broker on properties owned by the broker shall not, standing alone, subject the broker to the requirement to be designated as a BIC. Therefore, a broker-sol proprietor may lawfully provide only limited brokerage services without designating himself or herself as a BIC.

Broker Name and Address Rule

A broker must notify the Commission in writing (may include online) within 10 days of each change in personal name, firm name, trade name, residence address and firm address. If a broker intends to advertise in any manner using a firm name or assumed name which does not set forth the surname of the broker, the broker must first register the firm name or assumed name with the county register of deeds office in each county in which the broker intends to engage in brokerage activity and must also notify the Commission of the use of such firm name or assumed name. For individuals and partnerships, a name is "assumed" when it does not include the surname of the licensee. For a firm required to be registered with the Secretary of State, a name is "assumed" when it is different from the firm's legal name as registered with the Secretary of State. A licensee operating as a sole proprietorship, partnership or business entity other than a corporation or limited liability company may NOT include in its name the name of an unlicensed person or a provisional broker. A broker who proposes to use a business name that includes the name of another active, inactive or cancelled broker must have the permission of that broker or his or her authorized representative.

Limited Nonresident Commercial Broker

A broker or salesperson residing in a state other than North Carolina who holds an active broker or salesperson license in the state where his or her primary place of real estate business is located may apply for and obtain a North Carolina "limited nonresident commercial broker license" that entitle such licensee to engage in transactions for compensation involving "commercial real estate" in North Carolina. While the non-resident limited broker will remain affiliated with his/her out of state real estate company and will not have a north carolina broker-in-charge, the non-resident licensee must enter into a notification of broker affiliation and a brokerage cooperation agreement with a resident NC broker not on provisional status and the licensee must be supervised by the NC broker while performing commercial real estate brokerage in NC. Like a firm license, a limited nonresident commercial broker license is a separate license.

Designation of Trust Account and FDIC Insurance.

A broker-in-charge who must maintain a trust account must ensure that the bank properly designates the account and that the words "trust account" or "escrow account" appear on all signature cards, bank statements, deposit tickets and checks. Even though the escrow account typically is in the name of the company or broker, so long as the broker properly designates the account as a "trust" or "escrow" account and keeps accurate records that identify each owner of the funds and/or depositor (buyer, seller, lessor, lessee, etc.), the depositors are protected from the funds being "frozen" or attached if the broker/trustee becomes insolvent, incapacitated, dies, has tax liens, becomes involved in a lawsuit, etc. Failure to properly designate an account titled in the name of the company/broker as a trust or escrow account may result in attachment of the account by others to collect a judgment or denial of FDIC insurance coverage as to each individual's interest in the account. So long as the account is properly designated as a trust/escrow account, all deposits are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per each individual for whom funds are held. Thus, a broker's trust account may contain $500,000 total, but all funds are fully insured so long as no one individual's interest in the account exceeds $250,000.

Brokerage Fees & Compensation

Disclosure to principal of compensation from a vendor or supplier of goods or services - Paragraph (a) prohibits a licensee from receiving any form of valuable consideration from a vendor or supplier of goods or services in connection with an expenditure made on behalf of the licensee's principal in a real estate transaction without first obtaining the written consent of the principal. Disclosure to a party of compensation for recommending, procuring or arranging services for the party. - Paragraph (b) prohibits a licensee from receiving any form of valuable consideration for recommending, procuring, or arranging services for a party to a real estate transaction without full and timely disclosure to such party. The party for whom the services are recommended, procured, or arranged does not have to be the agent's principal. Disclosure to principal of compensation for brokerage services in sales transactions. - Paragraph (c) deals with disclosure to a licensee's principal of the licensee's compensation in a sales transaction from various sources other than in situations addressed in (a) and (b). A broker may not receive any compensation, incentive, bonus, rebate or other consideration of more than nominal value (1) from his or her principal unless the compensation, etc. is provided for in a written agency contract or (2) from any other party or person unless the broker provides to his or her principal a full and timely disclosure of compensation.

First Substantial Contact

Most frequently will occur at the first "face-to-face" meeting with a prospective buyer. However, this varies depending on the particular situation and may or may not be at the time of the first or initial contact with the prospective buyer. Many first contacts are by telephone and do not involve discussions which reach the level that would require disclosure, although some initial phone contacts, especially those with out-of-town buyers, could reach this level. First substantial contact occurs at the point in time when a discussion with a prospective buyer begins to focus on the buyer's specific property needs and desires or on the buyer's financial situation. An agent planning to work with a prospective buyer as a seller's agent or subagent should assure that disclosure of his/her agency status is made in writing to the prospective buyer prior to obtaining from the prospective buyer any personal or confidential information that the buyer would not want the seller to know.

Regaining Lost Broker-in-Charge Designation or Eligibility

Once a broker's BIC designation or eligibility has been terminated, the broker may regain that status only by being redesignated as a BIC (it is not possible to regain BIC eligibility without first being redesignated as a a BIC). In brief, the broker must first have a license on active status. If the license has expired, it must first be reinstated. If the license is inactive due to a CE deficiency, then the licensee must first complete whatever CE is necessary to reactivate the license and in either case, must then submit a reactivation for to the commission requesting that the license be placed back on active status. A broker who has lost his BIC designation or eligibility should not take either the 12-hour BIC course or the BICUP course prior to officially reactivating his license with the Commission. Once back on active status, the broker must possess the experience required for initial designation and must first complete the 12-hour BIC course prior to requesting re-designation as a BIC regardless of when the broker may have previously taken the 12 hour course prior to re-designation.

BIC Eligibility

Once a newly designated BIC completes the 12 hour BIC course within 120 days of his designation, he becomes broker in charge eligible. This status allows a broker to be re-designated as a BIC at any time in the future after a period of not actively serving as a BIC without having to again satisfy the qualification requirements for initial designation so long as the broker continuously maintains his/her BIC eligibility.

Residential Property and Owners' Association Disclosure Statement

State law (Chapter 47E of the General Statutes) requires that most residential property owners complete a disclosure form to give to prospective purchasers. The form seeks to elicit information about the condition of the property by asking various questions, to which owners may answer "yes," "no," or "no representation." Failure to provide a buyer with this form may allow the buyer to cancel the contract by notifying the seller in writing within three calendar days of contract acceptance. Licensees are expected to "assist" sellers with completion of the form but should not complete the form for a seller or advise a seller as to what representation (or No Representation) to make. That being said, licensees should be certain to advise sellers that the licensee is obligated by law to disclose all material facts about or relating to the seller's property to prospective buyers regardless of what representation the seller makes on the disclosure form.

Commission will not arbitrate commission disputes

The Commission shall not make rules or regulations regulating commission, salaries, or fees to be charged by licensees. The Commission will not act as a board of arbitration regarding such matters as the rate of commissions, the division of commissions, pay of brokers and similar matters.

RESPA prohibitions control

Paragraph (i) provides that nothing in this rule permits a licensee to accept any fee, kickback, etc. that is prohibited by the federal Real Estate Settlement Procedures Act (RESPA) or implementing rules, or to fail to make any disclosure required by that act or rules.

Temporary license status category

Provisional broker status is comparable to a salesperson license in most other states except that it is temporary. They may not retain this status indefinitely - they must complete required postlicensing education (one 30-hour course each year for the three years following initial licensure - total of 90 hours) to remove the provisional status of their licenses and to remain eligible for active license status

Practice of Law

Real estate licensees may not perform for others any legal service described in G.S> 84-2.1 or any other legal service. Examples of legal services which licensees may NOT provide: 1. Drafting legal documents such as deeds, deeds of trust, leases and real estate sales contracts for others. Although licensees may "fill in" or "complete" pre-printed real estate contract forms which have been drafted by an attorney, they may NOT under any circumstances complete or fill in deed or deed of trust forms. 2. Abstracting or rendering an opinion on legal title to real property. 3. Providing "legal advice" of any nature to clients and customers, including advice concerning the nature of any interest in real estate or the means of holding title to real estate. (Note: Although providing advice concerning the legal ramifications of a real estate sales contract is prohibited, merely "explaining" the provisions of such a contract is not only acceptable, but highly recommended.)

Broker-In-Charge Responsible for Trust Accounts.

Requires a broker to maintain complete records showing the deposit, maintenance and withdrawal of money belonging to the broker's principals or held in escrow or in trust for the broker's principals. Paragraph (g) of that rule also provides that the Commission may inspect trust account records periodically without prior notice and whenever the records are pertinent to investigation of a complaint against a licensee. A broker-in-charge (BIC) is responsible for the proper maintenance of real estate trust accounts and records pertaining thereto.

Disclosure of Agency Status by Sellers' Agents and Subagents to Prospective Buyers

Requires a seller's agent or subagent in sales transaction to disclose his/her agency status in writing to a prospective buyer at the "first substantial contact" with the buyer. It is recommended that sellers' agents make this required written disclosure using the form provided for this purpose in the Working with Real Estate Agents brochure that must be provided to buyers (as well as to sellers) at first substantial contact. The reason for this requirement is that buyers tend to assume that an agent they contact to work with them in locating a property for purchase is "their" agent and working primarily in their interest.

Delivery of Instruments

Requires agents to immediately, but in no event later than five days from the date of execution, deliver to the parties thereto copies of any required written agency agreement, contract, offer, lease, or option affecting real property. An offer must be immediately presented to a seller even if there is a contract pending on the property. The agent should advise the seller that serious legal problems could result from the seller's acceptance of such offer and that the seller should contact an attorney if he is interested in treating the offer as a back-up offer or in attempting to be released from the previously signed contract. G.S. 93A-6(a)(14) requires a broker to provide his/her client a detailed and accurate closing statement showing the receipt and disbursement of all monies relating to the transaction about which the broker knows or reasonably should know.

Brokers as Parties to Transactions

There is an inherent conflict of interest presented by a broker representing the very party against whom the broker, as an interested party, is negotiating. Rule A.0104 prohibits a broker who is selling property in which the broker has an ownership interest from representing a buyer of the property. Except that a broker who is selling commercial real estate, in which the broker has less than 25% ownership interest ay represent a buyer of that property if the buyer consents to the representation after full written disclosure of the broker's ownership interest. However, a firm listing a property owned by a broker affiliated with the firm may represent a buyer of that property so long as the individual broker representing the buyer does not have an ownership interest in the property and the buyer consents to the representation after full disclosure. Rule A.01014 prohibits a listing broker or firm from purchasing a property listed by that broker or firm unless they first disclose to the seller in writing that potential conflict of interest exists and that the seller may want to seek independent cousnel. Prior to the firm entering into a purchase contract, the listing broker and firm must disclose to the seller in writing that the seller has the right to terminate the listing.

Agency Disclosure Requirement

While Rule A.0104(a) requires all agency agreements, whether for lease or sales transactions, to be in writing, the Rule A.0104(c) agency disclosure requirement applies only to sales transactions. It requires licensees to provide prospective buyers and sellers, at "first substantial contact," with a copy of the Working with Real Estate Agents brochure, to review the brochure with them and then reach an agreement regarding their agency relationship. The licensee providing the brochure should also include his/her name and license number on the brochure. Note that the obligation under this rule is not satisfied merely by handing the prospective buyer or seller the brochure to read. The agent is required to review the contents of the brochure with the prospective buyer or seller and then reach agreement with them as to whether the agent will work with them as his/her agent or as the agent of the other party.

Custodian of Trust Account Records Other Than the Broker-In-Charge

While a broker-in-charge may transfer possession of trust money to a bookkeeper, secretary, or some other clerical employee to record and deposit the funds in a trust account and to maintain trust account records, the broker-in-charge nonetheless remains responsible for the care and custody of such funds.

Unworthiness and Incompetence

This broad provision authorizes the Real Estate Commission to discipline any licensee who, based on his or her conduct and consideration of the public interest, is found to be unworthy or incompetent to work in the real estate business. Here are a few examples of improper conduct which do not specifically violate another license law provision but which might support a finding of unworthiness or incompetence: 1. Failure to properly complete (fill in) real estate contracts or to use contract forms which are legally adequate. 2. Failure to diligently perform the services required under listing contracts or property management contracts. 3. Failure to provide accurate closing statements to sellers and buyers accurate income/expense reports to property owners.

Improper Dealing

This broad provision prohibits a real estate licensee from engaging in "any other conduct [not specifically prohibited elsewhere in the License Law] which constitutes improper, fraudulent, or dishonest dealing. The determination as to whether particular conduct constitutes "improper, fraudulent or dishonest dealing" is made by the Real Estate Commission on a case-by-case basis. One category of conduct which violates this provision is any breach of the duty to exercise skil, care, and diligence in behalf of a client under the Law of Agency. Another category of conduct which violates this provision is any violation of the State Fair Housing Act. This is mentioned separately under the "Discriminatory Practices" heading.

A listing agent is generally held to a higher standard with regard to negligent misrepresentation of material facts about a listed property to a buyer than is a selling agent who is acting as a seller's subagent.

This is because (1) the listing agent is in the best position to ascertain facts about the property, (2) the listing agent is expected to take reasonable steps to assure that property data included with the listing is correct and (3) i tis generally considered reasonable for a selling agent to rely on the accuracy of the listing data except in those situations where it should be obvious to a reasonably prudent agent that the listing information is incorrect. However, a buyer's agent may in some cases be held to a higher standard than a seller's subagent because of the buyer's agent duties to the buyer under the law of agency and the buyer's agent's special knowledge of the buyer's particular situation and needs.

Provisional Broker

This is the entry level license status category. A person who has met all the license qualification requirements (including a 75-hour prelicensing course and passing the Commission's license examination) is initially issued a broker license on provisional status and is referred to as a provisional broker. A provisional broker may perform the same acts as a broker whose license is NOT on provisional status so long as he or she is supervised by a broker who is a designated broker-in-charge.

Negligent Omission

This occurs when a licensee does NOT have actual knowledge of a material fact and consequently does not disclose the fact, but a reasonably prudent licensee "should reasonably have known" of such fact. In this case, the licensee may be guilty of "negligent omission" if he/she fails to disclose this fact to a buyer, seller, tenant or landlord, even though the licensee acted in good faith in the transaction.

Negligent Misrepresentation

This occurs when a licensee unintentionally misinforms a buyer, seller, tenants or landlord concerning a material fact either because the licensee does not have actual knowledge of the fact, because the licensee has incorrect information, or because of a mistake by the licensee. If a reasonably prudent licensee "should reasonably have known" the truth of the matter that was misrepresented, then the licensee may be guilty of negligent misrepresentation even though the licensee was acting in good faith. A very common example is the recording of incorrect info about a property in an MLS listing due the negligence of the listing agent. When a prospective buyer is subsequently provided the incorrect info from the MLS by the agent working with the buyer, a negligent misrepresentation by the listing agent occurs.

Auction Sales Exemption

provides that the provisions of the rule shall not apply to real estate licensees representing sellers in auction sales transactions. Note that in auction sales, the real estate agents involved almost invariably work only as seller's agents and this fact is considered to be self-evident. Thus, there is no need for agents to distribute and review the Working with Real Estate Agents brochure, no need for disclosure of agency status by the seller's agents, and no dual agency. or the unusual situation where a buyer may be represented by an agent in an auction sale transaction, the rule provides that such a buyer's agent shall, no later than the time of execution of a written agreement memorializing the buyer's contract to purchase, provide the seller or seller's agent with a written confirmation that he/she represents the buyer.

A couple of examples of permissible brokerage activities by a broker-sole proprietor who is NOT a designated BIC include:

receiving a referral fee from another broker or brokerage firm for referring business to the broker of firm or representing a relative or friend as a buyer's broker in a sales transaction provided the broker has not solicited the business, has not advertised or promoted his services and does not hold earnest money beyond the time it is required to be deposited in a trust account. The practical effect of these requirements is that a broker who will be operating independently in most cases must also designate himself as a BIC.

Disclosure of Agency Status by Buyers' Agents to Sellers or Sellers' Agents

requires a buyer's agent to disclose his/her agency status to a seller or seller's agent at the initial contact with the seller or seller's agent. Initial contact will typically occur when a buyer's agent telephones or otherwise contacts the listing firm to schedule a showing. The initial disclosure may be oral, but a written confirmation of the previous oral disclosure must be made (except in auction sale transactions) no later than the time of delivery of an offer to purchase. The written confirmation may be (and usually is) included in the offer to purchase. In fact, Commission Rule A.0112(a)(19) requires that any preprinted offer to purchase and contract form used by an agent include a provision providing for confirmation of agency status by each real estate agent (and firm) involved in the transaction.

Agency Agreements

requires all agency agreements for brokerage services (in both sales and lease transactions) to be in writing and signed by the parties thereto. Requires agency agreements with property owners (both sellers and lessors) of any type of property to be in writing prior to the broker providing any services. Allows an express oral buyer/tenant agency agreement from the outset of the relationship, but the agreement must be reduced to writing no later than the time any party to the transaction wants to extend an offer. As a practical matter, this oral agreement needs to address all key aspects of the relationship, including agent compensation, authorization for dual agency, etc. Note: A buyer/tenant agency agreement must be in writing from the outset if it seeks to limit the buyer/tenant's right to work with other agents or binds the client to the agent for any definite time period. In other words, an oral buyer/tenant agency agreement must be "non-exclusive" and must be for an indefinite period and terminable by the client at any time.

Consent to Dual Agency:

requires generally that an agent must obtain the written authority of all parties prior to undertaking to represent those parties as a dual agent. It is important to note that this requirement applies to all real estate transactions (sales and lease/rentals), not just sales transactions.

If first substantial contact occurs by telephone or by means of other electronic communication where it is not practical to provide written disclosure,

the agent shall immediately disclose by similar means whom he/she represents and shall immediately, but in no event later than three days from the date of first substantial contact, mail or otherwise transmit a copy of the written disclosure to the buyer.

Nominal Compensation

Compensation is considered to be nominal if it is of insignificant, token or merely symbolic worth. The Commission has cited gifts of a a $25 bottle of wine or a $50 dinner gift certificate as being examples of nominal compensation paid to a broker that do not require the consent of the broker's principal.

Representing Another Broker without Consent

prohibits a licensee from "representing or attempting to represent a real estate broker other than the broker by whom he or she is engaged or associated, without the express knowledge and consent of the broker with whom he or she is associated." While brokers may work for or be associated with more than one real estate company at the same time, so long as they have the express consent of all brokers-in-charge, provisional brokers may never engage in brokerage activities for more than one company at a time.

Undisclosed Dual Agency

prohibits a real estate agent from acting for more than one party in a transaction without the knowledge of all parties for whom he or she acts. A Commission Rule takes this a step further by providing that a broker or brokerage firm representing one party in a transaction shall not undertake to represent another party in the transaction without the express written authority (i.e., authorization of dual agency) of each party.

Self-Dealing

prohibits any self-dealing on the part of an agent. For example, if an agent attempts to make a secret profit in a transaction where he is supposed to be representing a principal, then the agent violates this conflict of interest provision.

Education Exception for Certain nonresident BICs

A nonresident NC broker who has been designated as the broker-in-charge of an office NOT located in NC and who has no office, primary residence or mailing address in North Carolina is NOT required to complete the 12-hour Broker-In-Charge Course and is NOT required to complete the four-hour mandatory Broker-in-charge Update Course to perfect BIC status or maintain BIC eligibility so long as the broker has no North Carolina addresses.

Thus, for the purpose of holding most trust money, the bank can be located outside North Carolina if the foregoing conditions are met. However, there are two notable exceptions, namely:

1) North Carolina residential landlord-tenant law [G.S.42-50] still requires that a residential tenant security deposit "... be deposited in a trust account with a licensed and insured bank or savings institution located in the State of North Carolina..." 2) License Laws regulating timeshare sales also require the developer and timeshare salespersons (who must have broker licenses) to immediately deposit all payments received in connection with a timeshare sale into "... a trust or escrow account in an insured bank or savings and loan association in North Carolina..." and such payments must remain in the escrow account during the purchaser's ten day cancellation period.

Type and Location of Trust Account. A broker's trust account or escrow account must be:

1) a demand deposit account 2) in a federally insured depository institution 3) lawfully doing business in North Carolina 4) that agrees to make the account records available for inspection by Commission representatives.

A "trust account" or "escrow account" (the terms are synonymous for Commission purposes) is simply a bank account into which trust money (and only trust money) is deposited. The three primary features of a trust or escrow account are that it is:

1) separate, containing only monies belonging to others, 2) custodial, meaning only the broker or the broker's designated employees have access to the account, but no one who has funds in the account has access, and 3) available on demand, that is, the funds may be withdrawn at any time without prior notice.

In the case of a prospective buyer, the agent may either:

(1) act as the buyer's agent under either an oral or written agreement as addressed in Rule A.0104(a), or (2) work with the buyer as a seller's agent, disclosure of which must be in writing from the outset.

In the case of a prospective seller, the agent may either:

(1) act as the seller's agent, which is the typical situation and requires a written agreement from the outset of their relationship, or (2) work with the seller as a buyer's agent if the agent already represents a prospective buyer.

Requirements to Serve as BIC

- Broker license must be on "active" status but NOT on "provisional" status. A provisional broker is ineligible to serve as a broker in charge, as is a broker whose license is inactive or expired. - Broker must have at least two years full-time (or part-time equivalent) real estate brokerage experience within the preceding five years, or qualifications the Commission finds equivalent to such experience. The Commission may request evidence of such experience; equivalent qualifications may include several years as a real estate attorney or new homes sales representative for a corporate owner. Others may be able to obtain a partial waiver based on substantial non-brokerage direct experience in real estate transactions or substantial brokerage experience that is more than five years old. - After designation as a BIC, a broker must complete the Commission's 12-hour Broker-In-Charge Course within 120 days of designation (unless the 12-hour course has been taken within the previous three years). Failure to complete this course within the 120 days will result in the BIC being removed as BIC. The broker must then take the course before he or she may again be designated as a BIC.

Termination of BIC Eligibility or Designation A broker's BIC eligibility and, if currently designated as a BIC, his or her BIC designation, shall be terminated upon the occurrence of any of these following events:

- License Expiration (licensee fails to renew license annually by June 30), suspension, revocation or surrender - License made inactive for any reason, including the failure to complete all CE required for BICs. - Broker is found by the Commission to have not possessed the required qualifying experience at the time of either initial designation or re-designation as a BIC.

To retain this "broker-in-charge eligibility", rule A.0110 requires that a BIC must:

- Renew his broker license in a timely manner each license year and keep the license on active status at all times. - Complete each license year the four-hour mandatory Broker-in-charge Update Course (BICUP) as well as any approved four-hour CE elective. The BICUP Course must be taken initially during the first full license year following designation as a broker-in-charge and each license period thereafter. The ICUP course satisfies the broker's four-hour mandatory continuing education update course requirement. If a BIC or a broker with BIC eligibility fails to take both the BICUP and one elective CE course by June 10 in any given year when required, then the broker will be removed as broker-in-charge or lost broker-in-charge eligibility the following July 1.

Exemptions; The following persons and organizations are specifically exempted from the requirement for real estate licensure:

1. A business entity selling or leasing real estate owned by the business entity when the acts performed are in the regular course of or are incident to the management of that real estate and the investment therein. This exemption extends to officers & employees of an exempt corporation, the general partners of an exempt partnership and the managers of an exempt limited liability company when engaging in acts or services for which the corporation, partnership or limited liability company would be exempt. 2. A person acting as an attorney-in-fact under a power of attorney from the owner authorizing the final consummation of performance of any contract for the sale, lease or exchange of real estate. 3. An attorney-at-law who is an active member of the NC State Bar only when performing an act or service that constitutes the practice of law under Chapter 84 of the general statutes. Thus, the attorney exemption is strictly limited and attorneys generally may NOT engage in real estate brokerage practice without a license. 4. A person acting as a receiver, trustee in bankruptcy, guardian, administrator or executor or any person acting under a court order. 5. A trustee acting under a written trust agreement, deed of trust or will or the trustee's regular salaried employees. 6. Certain salaried employees of broker-property managers. 7. An individual owner selling or leasing the owner's own property. 8. A housing authority organized under Chapter 157 of the General Statutes and any regular salaried employee with regard to the sale or lease of property owned by the housing authority or to the subletting of property which the housing authority holds as tenant.

Material Facts

1. Facts about the property itself (such as structural defect or defective mechanical systems). 2. Facts relating directly to the property (such as a pending zoning change or planned highway construction in the immediate vicinity). 3. Facts relating directly to the ability of the agent's principal to complete the transaction (such as a pending foreclosure sale). Note: Regardless of which party in a transaction a real estate agent represents, the facts described above must be disclosed to both the agent's principal and to third parties the agent deals with on the principal's behalf. In addition, an agent has a duty to disclose to his or her principal any information that may affect the principal's rights and interests or influence the principal's decision in the transaction.

Brokerage activities include:

1. Listing (or offering to list) real estate for sale or rent. Examples: soliciting listings, providing information to the property owner, and preparing listing agreements or property management agreements. 2. Selling or buying (or offering to sell or buy) real estate. Examples: advertising listed property for sale, "showing" listed property to prospective buyers, providing information about listed property to prospective buyers (other than facts that might appear in an ad), negotiating a sale or purchase of real estate, and assisting with the completion of contract offers and counteroffers using preprinted forms and communication of offers and acceptances. 3. Leasing or renting (or offering to lease or rent) real estate. Examples: advertising listing property for rent, showing listed rental property to prospective tenants, providing information about listed rental property to prospective tenants (other than facts that would appear in an ad), negotiating lease terms, and assisting with the completion of lease offers and counteroffers using preprinted forms and communication of offers and acceptance. 4. Conducting (or offering to conduct0 a real estate auction. Note: an auctioneer's license is also required to auction real estate. 5. Selling, buying, leasing, assigning or exchanging any interest in real estate, including a leasehold interest in connection with the sale or purchase of a business. 6. Referring to a party to a real estate licensee, if done for compensation. Any arrangement or agreement between a licensee and an unlicensed person in any way for finding, introducing or referring a party to the licensee has been determined by NC's courts to be prohibited under license law -- no licensee may pay a finder's fee, referral fee, bird dog fee to an unlicensed person

Every written agency agreement of any kind must also:

1. Provide for its existence for a definite period of time and terminate without prior notice at the expiration of that period. [Exception: an agency agreement between a broker and a landlord to procure tenants for the landlord's property may allow for automatic renewal so long as the landlord may terminate with notice at the end of any contract or renewal period.] 2. Contain the Rule A.0104(b) non-discrimination (fair housing) provision, namely: "The broker shall conduct all brokerage activities in regard to this agreement without respect to the race, color, religion, sex, national origin, handicap, or familial status of any party or prospective party." (This provision must be set forth in a clear and conspicuous manner which shall distinguish it from other provisions of the agency agreement) 3. Include the license number of the individual licensee who signs the agreement.

An unlicensed, salaried employee MAY:

1. Receive and forward phone calls and electronic messages to licensees. 2. Submit listings and changes to a multiple listing service, but only if the listing data or changes are compiled and provided by a licensee. 3. Secure copies of public records from public repositories (i.e., register of deeds office, county tax office, etc.) 4. Place "for sale" or "for rent" signs and lock boxes on property at the direction of a licensee. 5. Order and supervise routine and minor repairs to listed property at the direction of the licensee. 6. Act as a courier to deliver or pick up documents. 7. Provide to prospects basic factual information on listed property that might commonly appear in advertisements in a newspaper, real estate publication or internet website. 8. Schedule appointments for showing property listed for sale or rent. 9. Communicate with licensees, property owners, prospects, inspectors, etc. to coordinate or confirm appointments 10. Show rental properties managed by the employee's employing broker to prospective tenants and complete and execute preprinted form leases for the rental of such properties 11. Type offers, contracts and leases from drafts of pre-printed forms completed by a licensee. 12. Record & deposit earnest money deposits, tenant security deposits, and other trust monies, and otherwise maintain records of trust account receipts and disbursements, under the close supervision of the office BIC, who is legally responsible for handling trust funds and maintaining trust accounts. 13. Assist a licensee in assembling documents for closing. 14. Compute commission checks for licensees affiliated with a broker or firm and act as a bookkeeper for the firm's bank operating accounts.

Handling Option Money and Due Diligence Fee.

A broker may accept custody of a check or other negotiable instrument made payable to the seller of real property as payment for an option or due diligence fee, but only for the purpose of delivering the instrument to the seller. While the instrument is in the custody of the broker, the broker shall, according to the instructions of the buyer, either deliver it to the seller or return it to the buyer. The broker shall safeguard the instrument and shall be responsible to the parties on the instrument for its safe delivery as required by this Rule. A broker shall not retain such an instrument for more than three business days after the acceptance of the option or other sales contract. If, however, a buyer for some reason gives a broker cash for the option money or due diligence fee, then the broker must immediately deposit the cash in his/her trust account pending contract formation as cash must always be deposited into a trust account within three banking days of receipt — no exceptions. If the parties enter into a contract, then the broker would write a check from the trust account payable to the seller, noting in the memo section and trust account records that it is for the option fee or due diligence fee from the buyer.

Advertising

A broker may not advertise or display a for sale or for rent sign on a property without the written consent of the owner or the owner's authorized agent. A broker may not advertise any brokerage service for another without the consent of his or her BIC and without including in any advertisement the name of the broker or firm with whom the provisional broker is associated. The rule also prohibits any ad by a licensee that indicates an offer to sell, buy, exchange, rent or lease real property is being made by the licensee's principal without the involvement of a broker -- i.e., a "blind ad". All advertising by a licensee must indicate that it is the advertisement of a broker or brokerage firm.

Dual Agency Status of Firm

A firm which represents more than one party in the same real estate sales transaction is a dual agent, and further states that the firm, through the brokers affiliated with the firm, shall disclose its dual agency to the parties. Dual agency is not limited to those situations where an individual agent is working with both a buyer client and seller client (or lessor and commercial tenant) in the same transaction. If one agent of a firm is working with a buyer client of the firm and another agent of the same firm is working with a seller client of the firm in a transaction involving the sale of the seller client's property to the buyer client, then the firm is a dual agent (as it holds both agency agreements). However, a firm functions through its employees, thus, under common law, whenever the firm is a dual agent of certain parties in a transaction, all licensees affiliated with that firm are also dual agents of those parties in that transaction.

Broker

A provisional broker who satisfies all postlicensing education requirements to terminate the provisional status of such license becomes a broker without having to take another license examination. A broker is NOT required to be supervised by a broker in charge in order to hold an active license. An applicant who is a licensed broker in another US jurisdiction may be licensed directly as a North Carolina broker NOT on provisional status by passing the state section of the north carolina license examination. All others must first be licensed in North Carolina as a provisional broker and then satisfy the postlicensing education requirement to become a non-provisional broker. Most frequently, brokers elect to work for another broker or brokerage firm. Brokers may also elect to operate independently as a sole proprietor; however, with limited exceptions, such broker will have to qualify for and designate himself or herself as a broker-in-charge to operate independently and perform most brokerage activities

Broker-In-Charge

A real estate broker who has been designated as the broker having responsibility for the supervision of real estate provisional brokers engaged in real estate brokerage at a particular real estate office and for other administrative supervisory duties as the commission shall prescribe by rule. Commission Rule A.0110 requires that each real estate office must have a broker who meets the qualification requirements to serve as a broker-in-charge of the office and who has designated himself or herself as the broker-in-charge of that office. Broker-in-charge is not a separate license, but only a separate license status category. A broker who is to serve as the BIC of an office (including working independently) must be designated as a BIC with the Commission

Receipt of Trust Money by Provisional Broker.

All trust money received by a provisional broker must be delivered immediately to the provisional broker's broker-in-charge. In other words, provisional brokers may not retain or hold trust money any longer than absolutely necessary to deliver the trust money to his/her broker-in-charge. Similarly, trust monies received by a nonresident limited commercial broker are to be delivered immediately to and held by the resident North Carolina broker with whom the nonresident is affiliated.

Interest-Bearing Trust Account.

Both G. S. 93A-6(a) (12) and Rule A.0116(c) permit a broker to deposit trust money into an interest-bearing trust account so long as the broker first obtains written authorization for deposit in an interest-bearing account from all parties having an interest in the monies being held. Such authorization must specify how and to whom the interest will be paid. If the authorization is contained in an offer, contract, lease or other transaction instrument, it must be set forth in a conspicuous manner that distinguishes it from other provisions of the instrument. Remember, however, that all trust accounts must be a demand account, so investment of trust monies in any type of security, such as a government bond or a fixed term certificate of deposit, is prohibited.

Retention of Records

Brokers are required to retain records pertaining to their brokerage transactions for three years from the successful or unsuccessful conclusion of the transaction or the disbursement of all trust monies pertaining to that transaction, whichever occurs later. Documents that must be retained include sale contracts, leases, offers (even those not accepted), agency contracts, earnest money receipts, trust account records, disclosure documents, closing statements, broker cooperation agreements, broker price opinions and comparative market analyses (including notes and supporting documentation) and any other records relating to a transaction.

Commission Guidelines

Each broker involved in the transaction is expected to review the completed HUD-1 statement and to verify its accuracy and completion in accordance with the provisions of the sales contract. The broker is expected to confirm the accuracy of those entries about which he or she has direct knowledge. These would include items from the sales contract like the sales price, earnest money and due diligence fee, if any, as well as items such as the brokerage commission. With regard to entries on the HUD-1 representing amounts due to or from third parties, the broker may generally assume that the amounts for the charges and credits cited in the settlement statement are correct unless there is some reason that would lead a reasonably prudent broker to believe they are incorrect. However, the broker is expected to assure that: All relevant charges and credits are appropriately charged or credited (i.e., entered in the proper column) to the borrower-buyer and seller; and all calculations for prorated items, escrow reserves, interim interest, excise tax and "bottom line" figures (i.e., total settlement charges for borrower-buyer and seller, cash from borrower-buyer and cash to seller) are correct. The closing attorney should be immediately advised of any noted suspected errors or omissions. The broker must also be especially careful to take appropriate action in the event he or she becomes aware of a misrepresentation of facts on the settlement statement that is potentially harmful to any party with an interest in the transaction."

Compensation of unlicensed persons by brokers prohibited

G.S. 93A-6(a)(9) authorizes the Commission to take disciplinary action against a licensee for paying any person for acts performed in violation of the License Law. A licensee shall not in any manner compensate or share compensation with unlicensed persons or entities for acts performed in North Carolina for which a license is required. [Note that NC brokers may split commissions or pay referral fees to licensees of another state so long as the out-of-state licensee does not provide any brokerage services while physically in NC.] One narrow, limited exception to this restriction is provided in paragraph (h) - licensees may pay referral fees to travel agents who contact them to book vacation rentals only, so long as well-defined procedures are followed.

Number of Trust Accounts

Except for brokers who are managing homeowner or property owner association funds, a broker holding trust money is only required to have one trust account. All earnest money deposits, tenant security deposits, rents, and other trust monies may be deposited into this one common trust account. However, brokers who are active in both sales and property management often find it helpful to use more than one trust account. Rule A.0118(a) requires brokers who handle homeowner or property owner association funds to maintain a separate trust account for each property owner association or homeowner association they manage. The funds of one homeowner association are not to be commingled with funds from any other association nor with any general trust monies. The broker also must provide the association with periodic written statements not less than once each quarter reporting all monies received, disbursed, and due, but not paid (i.e., delinquent), as well as the balance of funds in the account.

Designated Agency

Is a form of dual agency in certain sales transactions involving in-house dual agency. It is an optional method of practicing dual agency that may be adopted by a real estate firm if the firm establishes a policy consistent with the Commission's designated agency rules. Designated agency involves appointing or "designating" an individual agent(s) in a firm to represent only the interests of the seller and another individual agent(s) in a firm to represent only the interests of the buyer when a firm has an in-house dual agency situation. The principal advantage is that each party receives fuller representation by their designated agent. In the typical dual agency situation, client advocacy is essentially lost because the dual agent may not seek an advantage for one client to the detriment of the other client. Authority to practice designated agency must be in writing no later than the time a written dual agency agreement is required.

Violating any Commission Rule

The law also has a catch-all provision that subjects a licensee to disciplinary action for violating any rule adopted by the Commission.

Disbursement of Earnest Money

This rule permits a broker-in-charge to transfer an earnest money deposit from his/her trust account to the closing attorney or other settlement agent not more than ten (10) days prior to the anticipated settlement date. Earnest money may not be disbursed prior to settlement for any other purpose without the written consent of the parties.

Drafting Legal Instruments

This rule prohibits licensees from drafting legal instruments, e.g., contracts, deeds, deeds of trust, etc., but does allow them to fill in the blanks on preprinted sales or lease contract forms, which is not construed to be the unauthorized practice of law.

Offers and Sales Contracts

This rule specifies what minimum terms must be contained in any preprinted offer or sales contract form a licensee, acting as an agent, proposes for use by a party in a real estate transaction.

A commission rule requires written authority for dual agency from the formation of the relationship except situations where a buyer/tenant is represented by an agent working under an oral agreement as permitted by A.0104(a), in which case written authority for dual agency must be obtained no later than the time one of the parties represented by the agent working as a dual agent makes an offer to purchase, sell, rent, lease or exchange real estate to the other party.

Thus, it is permissible for the agent to operate for a limited period of time under an oral dual agency agreement. It still requires agents to obtain the consent of all parties prior to beginning to act as a dual agent for those parties.

To qualify for designation as a broker-in-charge:

a broker's license must be on "active" status but NOT on provisional status, the broker must have two years full-time or part-time equivalent ACTUAL brokerage experience within the previous five years (or education/experience the Commission finds equivalent to such experience) and the broker must complete a 12-hour Broker-In-Charge course within 120 days after designation