2015-16 broker-in-charge update
TRANSCRIPT
PowerPoint Presentation
Welcome to the2015-2016BICUP Course
Should you be here???Brokers-in-Charge& BIC Eligible Brokers should take this course.
Provisional Brokers and non-BIC Brokersmust take the General Update Course.
REQUIRES 90% Attendance
3
Course Completion ReportingWe are responsible for reporting course completion information to the NCREC via Internet within 7 days .
Todays TopicsFarewell HUD-1? Hello TRID! Sales of Vacation RentalsChanges to Commission Rules, Contracts and AddendaBroker SafetyLicensing and EducationHandling ComplaintsHandling Trust MoniesBIC Requirements
Section 1:Farewell HUD-1?Hello TRID!p1
Its March 10 and you just received a Buyer Closing Disclosure from the attorney for your closing on March 14.
The document is 5 pages long, and your Buyers are waiting for you to explain it to them.
Are you ready to do that? Scenario 1p1
Your Buyers closing is scheduledfor Monday, May 23.
In order to close on that date, your Buyers must receive a Closing Disclosure by May 19.
The clock is tickingScenario 2p1
Your obligations are not changing.
There are many similarities between the old and new forms.p2
ObjectivesAt the end of this section, you should be able to:explain the purpose of the changes.identify events that trigger the Loan Estimate (LE).identify key elements of the Closing Disclosure (CD).identify critical dates for delivery of the CD.explain the brokers responsibility for LE and CD.identify issues that may cause closing delays.p2
AbbreviationsCFPB: Consumer Financial Protection BureauTRID: TILA-RESPA Integrated DisclosuresTILA: Truth-In-Lending ActRESPA: Real Estate Settlement Procedures ActTIL: Truth-in-Lending (Statement)GFE: Good Faith EstimateHUD-1: Settlement Statement LE: Loan EstimateCD: Closing DisclosureBCD: Borrowers Closing DisclosureSCD: Sellers Closing Disclosurep2
What WAS the Problem?BEFORE October 2015: Duplicate forms required by TILA and RESPA
Dodd-Frank was tasked with consolidating the forms
p2
HenceHELLO, TRID:
TILA/RESPAIntegrated Disclosuresp3
New Disclosure Forms
GFE
Early TIL
Loan Estimate(LE)
HUD-1
Final TIL
ClosingDisclosure(CD)p3
p4
So, what does this mean for you as a Broker???
p5
Your obligations are not changing.
New rules apply toLOAN APPLICATIONS RECEIVEDon or afterOctober 3, 2015.
p5
Whos Responsible?LENDERS are responsible for knowing which transactions are covered.
Real estate brokers should have a GENERAL understanding.
Table on page 6 provided for your reference.pp5-6
May lenders use the new Loan Estimate and Closing Disclosure forms in excluded transactions (when the forms are not required)?
p7
The HUD-1 isStayin Alive.It will still be used in some transactions.
p7
Which changes requirea new 3-day review of CD? APR increases by MORE than:1/8% for fixed-rate1/4% for adjustable
Prepayment penalty addedBasic loan product changesp8
22
The Loan Estimate (LE)p9
Are Brokers responsible for the accuracy of the Loan Estimate? NO
p9
Should Brokers have a general understanding of when their clients are supposed to be given the Loan Estimate?
p9
The Loan EstimateMust be given within 3 days of Loan Application
p9
Loan ApplicationBorrower has provided:
legal namegross incomeSSN (for credit report)property addressestimate of property valueamount of mortgage loan requestedp9
The Loan EstimateA lender may NOT charge a consumerany fee(s) prior to providingthe Loan Estimate other thana reasonable fee for a
p10
Tolerance Limits still applyand are now calledPermissible Variations
Brief explanations of permissible variations are provided on page 10.p10
Brokers Responsibility for LEGENERAL understanding ofwhich transactions are subject to TRIDtiming & purpose of Loan Estimate
Lenders are responsible for the Loan Estimate. p11
THE CLOSING DISCLOSURES (CDs)p11
If a transaction begins with the OLD forms, it will end with the OLD forms.
If a transaction begins with the NEW forms, it will end with the NEW forms.Reminder: TRID rules apply to loan applications receivedon or after October 3. p11
2 Separate Closing Disclosures:Borrower (Buyer) and SellerInformation has not changed.Its just been reorganized.
p11
Why are there two separate Closing Disclosure forms?Borrowers confidential loan informationis not shared with Seller. p12
What HIPAA did to medical offices, TRID has done to closing attorney offices.
p13
Page 1 of HUD-1 is now Page 3 of Buyers CDHUD-1 page 1BCD page 3
BCD page 3 ALMOST IDENTICAL TO HUD-1
Page 2 of HUD-1 is now Page 2 of Buyers CDHUD-1 page 2BCD page 2
BCD page 2 (top half of page)Loan FeesAttorney & Title FeesPOC items
BCD page 2 (bottom half of page)Loan EscrowsRecording Fees & Excise TaxBrokerage feesInspections & Other Fees
The Sellers Closing Disclosure (SCD)SCD page 1 (sellers total debits & credits)SCD page 2 (sellers costs/expenses)
SCD page 1 (bottom portion of page)Total Seller CreditsTotal Seller DebitsBroker InfoSettlement Agent Info
SCD page 2 (bottom portion of page)Seller Costs/Debits & Seller-Paid Items
The Biggest Impact for Brokers:The Borrowers Closing Disclosure must beRECEIVED BY THE BORROWERat least 3 BUSINESS DAYS before Settlementp18
What is a Business Day?A Business Day is Monday-Saturday
Sundays and 10 federal public holidays are excluded
p18
Definition of RECEIVEDIf delivered IN PERSON: The CD is received on the same day it is provided.
If MAILED or delivered ELECTRONICALLY:The CD is received on the 3rd business day after deliveryOR when lender has EVIDENCE of receipt.p18
ExampleIf the BCD is RECEIVED BY THE BORROWER on Monday, what is the earliest possible date closing may occur?
Answer: Thursday (unless a federal holiday occurs during the period)MondayTuesdayWednesdayThursdayDeliveryDay 1Day 2Settlement(3rd business day)
p19
Brokers:The disclosure timeline is
Its important to educate your clients and customers.
p19
Rules apply to delivery of BCD ONLY
No requirements for delivery of SCD to Sellerp19
BCD must be delivered to BORROWERDelivery to Broker / Buyer Agentis NOT Sufficient
p19
If the lender decides to issue2 separate closing disclosures, a broker acting as a dual agent should only give the parties their respective CDsBuyer should only see the BCDSeller should only see the SCD
p19
Settlement Statement:Broker ObligationsBroker mustDiscloseANDConfirm Accuracy ofall entries that s/he has direct knowledgep21
Settlement Statement:Broker ObligationsBroker mustReviewANDConfirm Accuracy ofall calculationsp21
Potential IssuesClosings may be delayedTasks will have to be performed earlier (ex: title search)Some lenders will create Disclosures and send to closing attorneys & attorneys will not be allowed to make changesp22
Review and Discuss the Fact Situationand related Closing Disclosures on pages 23-28.Small Group Exercise:
Section 2:Sales of Vacation Rentalsp29
You discover a For Sale sign in the yard of one of the vacation rental properties you manage.
The sign shows the name of another broker/firm.
What should you do? Scenario 1p29
Youve listed a property that is in high demand. The seller tells you he sometimes uses it as a vacation rental. It is not his primary residence.
What questions should you ask him? Scenario 2p29
Your buyers are interested in a mountain home they can use as a second home and a vacation rental.
What questions should you ask the listing agent? Scenario 3p29
ObjectivesAt the end of this section, you should be able to explain:seller and buyer obligations when a vacation rental property is sold.how to handle early termination of the manager-brokers agency agreement.how to disburse trust monies when a vacation rental property is sold. the value of communication & cooperation between brokers managing & selling the same propertyp30
Vacation Rental Act (VRA) Applies toA landlord (person or entity)ORreal estate broker
that manages residential property for vacation rental.
VRA applies to ALL owners of residential property used for vacation rentals even if no broker is involved.p30
Vacation RentalRental of residential propertyVacation, leisure or recreation purposeLess than ninety (90) daysRenter has permanent residence elsewhere
p30
Handling Monies Related to Vacation RentalsOwner-Landlords OR Brokersmust deposit advance payments into trust or escrow account within 3 banking days of receipt.
may NOT disburse sales or occupancy tax or security deposit prior to end of tenancy or breach by tenant UNLESS refunding to tenant.pp30-31
What Monies May Be Released or Paid Out Prior to the Tenancy?Administrative feesFees owed to third parties on tenant's behalfMaximum of 50% of advance rent p31
Tenant Security Deposits (TSDs)Cannot post a bond for TSD in lieu of trust accountTelephone and cable television charges may be deducted (if specified in lease)Account to tenant within 45 dayspp31-32
When a Vacation Rental is SOLDALL Reservations must be disclosed to prospective buyers
Copies of lease agreements must be provided to Buyer within 10 days of closing
Buyer must honor lease agreements within 180 days of closingp32
ExceptionIf the Buyer continues to use the sameBroker-Property Manager,
the Seller doesnt have to provide lease agreements (because the Broker can provide them).
p32
ExceptionIf the Seller uses a standard lease agreement,
the Seller may provide only the unique info from each lease.
p32
If the Buyer DOES NOT continue to use the Sellers Broker-Property ManagerWithin 20 days of closing, the Buyer must notify each tenant in writing of:date of saleBuyers name & addresswhether tenants lease will be honoredwhether tenant has right to any refundp32
Disbursing Moniesin Escrow AccountTenancyOccurs or EndsAdvance PaymentsTenant Security Deposits
1) Less than 180 days after saleTransfer to buyer within 30 days& mail buyers info to tenantsTransfer to buyer within 30 days& mail buyers info to tenants
3) More than 180 days after sale that Buyer wont honorDisburse to tenant within 30 days of sale Disburse to tenant within 30 days of sale
2) More than 180 days after salebut Buyer agrees to honorTransfer to buyer within 30 days& mail buyers info to tenantsTransfer to buyer within 30 days& mail buyers info to tenants
p33
Brokers Managing Vacation Rentalsare subject to: Landlord-Tenant LawVacation Rental ActReal Estate License LawCommission RulesAgency Agreement with OwnerLease Terms
p34
Release of Advance Payments?The statute permits a broker to disburse some monies to owner prior to the tenancy but does not require it.
p34
What Monies May Be Released or Paid Out Prior to the Tenancy?Administrative feesFees owed to third parties on tenant's behalfMaximum of 50% of advance rent
p34
May a Broker disburse theproperty management (brokerage) fee with other advance payments?YES, IF:Broker is disbursing partial advance rents to owner ANDFee is earned and authorized to be disbursed in the prop mgmt agreementp34
ScenarioBroker's policy: 50% of total rent due at lease signing remaining 50% due 30 days prior to tenancy
Tenant signs a lease.Broker pays initial advance rent payment to owner, minus commission. Before the tenancy, Tenant cancels reservation and is due a refund OR the owner ceases to own the property.p35
Scenario Discussion QuestionsWhat does the law require? Who is liable for the 50% rent already paid to the owner?Who is liable for brokerage fees paid to the broker from advance rents prior to the tenancy?
p35
May an owner terminate the property management agreement prior to the termination date?
but there may be consequencesp36
May the vacation property management agreement contain a termination penalty? IF IT IS CLEAR AND CONSPICUOUS
p36
Early Termination FeesMay a seller compel a buyer to use the sellers property manager as a condition of the sell/purchase agreement? (NO)p36
A broker/vacation property manager drives by a property he manages and discovers a For Sale sign in the yard with the name of another company.
No one had contacted the broker-property manager regarding the sale.
What should he do?p37
Answer: Communicate withthe Owner & the Listing Firmp37
Is it a material fact that a property is being used for long-term or vacation rentals?
p37
Listing Agents need to knowwhether the property is being leased.property managers name & contact info.dates of occupancy for any signed leases.when the property management agreement expires.whether an early termination fee may be charged.p37
Buyer Agents need to knowdates of future tenancies.whether advance funds have been collected and/or released.whether advance rents have been paid to owner; and, if so, if broker retained brokerage fees.when the property management agreement expires.whether funds are being held in escrow.p37
Standard FormsREALTORS may use Vacation Rental Addendum with standard Offer to Purchase
Non-REALTORS may use standard forms with NC BAR logo only (not REALTOR logo)
REALTORS and Owners may use Vacation Rental Agreement
p38
Monies related toNC vacation rentals must be depositedin trust/escrow accountin insured bank or savings & loan in North Carolina
within 3 banking days of receipt
p38
A Broker managingvacation rental propertiesmust have awritten property management agreement with the ownerBEFOREproviding any brokerage services.p39
know the VRA.deposit monies in a NC-based trust account.transfer monies for rentals in 180 days to Buyer within 30 days of closing.refund monies to tenants for rentals that will not be honored.transfer monies if agency agreement is terminated.Brokers managing vacation rentals mustp39
For Discussion2014 Disciplinary Case
p40
Section 3:Changes toCommission Rules, Contracts and Addendap45
ObjectivesAt the end of this section, you should be able to explain:
changes to Commission Rules and Contracts & related Addendap45
Commission Rule Changesas of July 1, 2015p45
Rule A.0104: Early Termination FeeMay be included in any agency agreement (listing, buyer agency, or property management agreement)
If included, must be clearly and conspicuously disclosed on the agreementp46
Rule A.0104(o) ReviewIf a Broker has an ownership interest in a property, the Broker MAY NOT be a Buyers Agent for that property.p46
Rule A.0104(o) ExceptionCommercial Transactions Only
If broker has less than 25% ownership interest, Broker may represent a Buyer IF Buyer consents after full written disclosure of brokers ownership interestp46
What is a Commercial Transaction?Sale or Rental of real property that isNOT a residential one-to-four unit dwelling
Commercial Real Estate defined by Rule A.1802. See page 44.p46
Rule A.0105 Advertising To advertise, ALL Brokers must
have the consent of their BICsandinclude the names of their BICs and/or their firms in all their adsp46
Remember: You are required to keep copies of every ad! (per Rule A.0108)p47
Rule A.0116 Handling of Trust MoneyBefore July 1, 2015: A Listing Firm/Broker was not allowed to hold an EMD check made payable to an escrow agent other than his/her own firm. p47
As of July 1, 2015A Buyers Agent or Listing Firm/Broker may hold an EMD check made payable to an Escrow Agent other than the Broker or Firm.p47
The check must be delivered to the Escrow Agent within 3 days of contract formation.
What if a Buyer asks for the DDF or EMD check back before it is delivered?p48Answer: It dependsLets consider 2 different scenarios.
Listing Firm DOES hold earnest money. If Listing Firm still has possession of the checks, Listing Firm mustdeposit EMD into trust accountand return DDF to Buyer.Buyer Agent delivers offer to Listing Firm with DDF (payable to seller) andEMD (payable to Listing Firm).
2 days after effective date of contract, Buyer asks for both checks back.
Listing Firm holds both checks throughout contract negotiation.
Offer is negotiated and becomes a contract.
pp48-49
MLS states Listing Firm does not hold earnest money. Jane Smith, Attorney is Escrow Agent. Buyer Agent delivers offer to Listing Firm with DDF (payable to seller) andEMD (payable to Jane Smith, Atty).Listing Firm holds both checks throughout contract negotiation.Offer is negotiated and becomes a contract.2 days after effective date of contract, Buyer asks for both checks back. If Listing Firm still has possession of the checks,Listing Firm must return BOTH checks to Buyer.
pp48-49
As long as a Broker holds a check/instrument payable to the seller or another escrow agent,
the Broker must follow the Buyers instructions
even after the parties have entered into a legally binding contract.pp48-49
Sunshine Enterprises, Inc., Manager. Because this entity is a Manager,the entitys officers must be disclosed on/with QRS Realtys firm license application.Manager(an individual)
Sunshine Properties LLC, unlicensed entity,Member-Manager.Because Sunshine Properties LLC is a Manager, its Managers must be disclosed on/withQRS Realtys firm license application.
Sally Smith,licensed Broker, Member-Manager.Identified as QB.
John Davis, unlicensed individual,Member-Manager.Rule A.0502
QRS Realty LLC:Submits application for Firm Broker Licensepp50-51
Rule A.1711:CE Required of Nonresident BrokersNonresident Broker must notify the Commission within 10 days of
Change in status of out-of-state licenseORobtaining ANY NC addressp52
Rule A.1711, contdBroker's NC license will be made INACTIVE in 30 days unlessBroker proves s/he completed CE during previous license period (in another state or NC).Also: Once a broker has ANY NC address, the Broker must begin taking NC CE. p52
MOG Disclosurep52
Which Transactions?sales subject to Residential Property Disclosure Act first sale of a dwelling never inhabitedlease with option to purchase where lessee occupies the dwellingsale of residential property where parties agree not to complete a Residential Property and Owner Association Disclosure Statementp53
Is the MOG Disclosure required invacant land sales?NOp53
WHO must provide MOG and WHEN? Seller must provide MOG to Buyer no later than time of offer Must be signed by SellerBuyer should also sign to acknowledge receiptp53
What if MOG is NOT Provided?Buyer may cancel the contractwithin 3 calendar days of contract formationOR3 calendar days following receipt of disclosurewhichever occurs first.
If Buyer cancels due to MOG, all deposits should be refunded. p53
Brokers Duty for MOGInform owner of legal obligation to provide the MOG Disclosure Statementand the possible consequences of not providing it. p53
p53
Revisions toSales Contracts & Addenda
p56
Offer to Purchase & Contract (Form 2-T)Blank initial lines will not invalidate contractFixtures Provision RewrittenBuyer & Seller authorizations regarding closing disclosuresSeller must provide loan payoff infoSeller responsible for paying certain HOA charges
Use of Electronic MeansDate/Time defined as date/time of day in NCStatement to confirm that contract is binding when signed and communicatedDeletion of Seal next to SignaturesAcknowledgement for receipt of DDF
pp56-57
Revised Addenda2A11-T: Additional Provisions Addendum2A12-T: Owners Association Disclosure and Condominium Resale Statement Addendum4-T: Agreement to Amend Contractpp57-58
Section 4: Safety
p59
You have a listing that hasnt attracted many showings. You receive a call from a prospective buyer who claims to be sitting in his car in front of the listing. He says he is a cash buyer and wants to close in two weeks. He would like to see the property immediately.What would you do?Scenario 1p59
Youve scheduled an open house for Sunday afternoon. The home is located in a popular neighborhood and is occupied. What steps will you take to prepare for the open house?What IS a safe open house?Scenario 2p59
Learning ObjectivesAt the end of this section, you should be able todescribe various safety skills and strategies for real estate brokers.p59
Develop Situational Awareness
p59
Every Broker, Office, & Firm should have a Safety Policy
p60
Safety Video
Safety Tip #1:Identify the consumer. Be suspicious!
p60
Safety Tip #2:Always leave your Itinerary
p60
Safety Tip #3:Have a fully charged cell phone and have it readily available
p61
Safety Tip #4:Have a Prearranged Distress Code
p61
Safety Tip #5:Implement a Buddy System
p61
Safety Tip #6:Practice Vehicle Safety
p61
Safety Tip #7:Walk Behind
p61
Safety Tip #8:Dress for Safety and Success
p61
Safety Tip #9:Conduct safe personal marketing and be careful how you use social media
p62
Safety Tip #10:Conduct safe open houses
p62
Safety Tip #11:
p62
p62
Section 5:Licensing and Education Review
p63
My parents want to buy a beach house near Wilmington. Theyve asked me to be their buyers agent. Ive had a license for more than 10 years, but I havent taken any CE for the last 4 years. Can I represent them?Scenario 1p63
Ive decided to stop practicing brokerage on a day-to-day basis, but I want to be able to get referral fees.
Will I still need to pay the $45 renewal fee each year?Will I need to take CE?Scenario 2p63
ObjectivesAt the end of this section, you should be able to explain:
license categorieslicense renewal requirementsCE requirementsBIC requirementsp63
License CategoriesBroker LicenseProvisional BrokerBrokerBroker-In-Charge
Limited Nonresident Commercial License
Firm License
p64
Expired or Inactive =NO BROKERAGE ALLOWED!(including referral fees)p64
Current vs. Expired LicenseCURRENT: $45 renewal fee wasRECEIVED by the CommissionON OR BEFORE JUNE 30
p65
Current vs. Expired License
EXPIRED:Renewal fee was not received on time
EXPIRED = NO LICENSE
p65
ReinstatementCan reinstate within 6 months by paying $55.Deadline: December 31 of expiration year.
If expired more than 6 monthsSubmit application with fee & criminal background checkANDComplete additional education and/or exam.p65
145
Reinstatement:Additional Education RequirementsPB expired 6 mos-5 yrs Broker expired 6 mos-2 yrsBroker expired 2 yrs-5 yrsPB OR Broker expired more than 5 years
p65
146
Active vs InactiveACTIVE = Up-to-date on CE and/or Postlicensing EducationINACTIVE = Education Deficiency (or a PB with no BIC affiliation)
p66
147
UPDATE Non-BIC Brokers & Provisional Brokers take GenUpBICs or BIC-Eligible Brokers take BICUP
AND
ELECTIVE
EVERY LICENSE YEARContinuing Educationp66
148
All CE must be completed by June 10.
What happens if you miss the June 10 deadline?Inactive on July 1.Continuing Education
p66
You didnt take CE for the past 4 years. Now you want to activate your license. What must you do?Complete current years CETake elective courses to make up missed hours from last year (4 or 8 hours)ANDSubmit license activation form (REC 2.08)p66
150
On your own or with a partnerAnswer the 3 questions on page 67.
p67
REALTOR Code of Ethics TrainingQuadrennial training deadline: December 31, 2016
Applies to REALTOR-members only(not a Commission requirement)
Call your local board or associationor visit www.realtor.org for information
The only license category that requires brokerage experience. Broker-in-Charge
p68
Active Status and NOT Provisional2 years full-time brokerage experience within past 5 years.Complete 12-hour BIC course within 120 days of declaration (unless taken within the preceding 3 years).Broker-in-ChargeQualification Requirementsp68
Your license record will showBIC Eligible status AFTER:Youve satisfied all BIC qualification requirements.Youve submitted and NCREC has processed your BIC Declaration Form.Youve taken the 12-hour course on time.p68
155
To Maintain BIC Status-EligibilityRenew your license on time($45 by June 30)ANDTake appropriate CE on time(BICUP and one Elective by June 10).
p69
156
1. Return to Active / Current Status2. Submit Activation Form (REC 2.08)3. Attend 12-hour BIC Course4. Submit BIC Declaration Form (REC 2.04)
Next: Submit affiliation forms for all Brokers & PBs.To Regain BIC Status/Eligibility
p69
Section 6:Complaintsp71
Scenario 1You return from lunch to find a brown envelope from theNorth Carolina Real Estate Commission waiting on your desk.p71Whats in the brown envelope?
One of your affiliated brokers was convicted of a DWI in Virginia three months ago. Must the Broker report the conviction to NCREC? If so, how quickly must he report it?Scenario 2p71
p71
ObjectivesAt the end of this section, you should be able to: define which violations must be reported to the Commission and when they must be reportedexplain brokers duties to cooperate with, respond to and produce records for the Commissionp71
NCREC Video
Commissions Authoritytake disciplinary action investigate licensees and unlicensed activity and hold hearings issue subpoenas and compel witnesses to testify at hearingsimpose sanctionsp72
SanctionsRevocationLoss of licensure for an indefinite timeA broker whose license is revoked has no license.
Suspension Broker still has a license but is prohibited from using it for a specified period of time.p72
SanctionsReprimandPublic statement of disapproval by NCREC.Broker may continue to practice brokerage.
Commission may also ... impose reasonable conditions, restrictions, and limitations upon the license... p72
License revocation or suspensionmust be reported toClerk of Superior Courtin county of brokersprincipal place of business.
p72
The Commission has the authority to obtain a court order directing an unlicensed person or entity to cease engaging in illegal brokerage.
p72
Brokers Obligations & Dutiesreport convictions and disciplinary actions within 60 daysfile responses within 14 daysmake records available for inspection and reproduction upon request
p73
What do you have to report?ANYfelony OR misdemeanordisciplinary action regarding an occupational licenserestriction, suspension or revocation of a notarial commission (notary public)p73
When do you have to report?Within 60 days of conviction
p73
Must you reportan arrest? a prayer for judgment?a misdemeanor traffic offense that was reduced to an infraction? a DWI conviction in another state?p73
How is a Complaint Initiated?Rule A.0601 requires that a complaint...be in writingidentify the broker(s) complained againstprovide essential facts
p74
Anonymous ComplaintsComplainant does not have to be identified; however
copies of all information sent with complaint will be provided to the respondent-broker.
p74
Most Common ComplaintsMisrepresentationContract problemsAgency issuesLoan Fraud[Lack of] Professionalism
p74
How & When will a Broker know a Complaint has been filed?Regulatory Affairs begins a Correspondence or Field Investigation
p75
Regulatory Affairsmakes no assumptionsconcerning truth of allegationsuntil case is investigated.
p75
Investigation PeriodThis is your opportunity to explain your side of the story.Dont underestimate the importance of a thorough reply.
p75
Correspondence InvestigationsConsumer Protection Officersends a Letter of Inquirywith all information submitted with complaint.p75
If you receive a Letter of InquiryYou must respond within 14 Days.p75
What if you need an Extension?
p75
What to Send?A written statement of your positionA chronological narrative of your involvementSpecific documents or a copy of the transaction file as requested
p75
You must respond in writing.
p76
Everything you send becomes Public Record
p76
Failure to promptly and fully respond to a letter of inquiryis itself an offense.
p76
Field InvestigationsUsed when cases requirewitness interviewstrust account auditsexamination of evidencethat cannot be obtained through correspondence
p76
Dont SayYou dont have jurisdiction over me.
As you can see from the consumers ranting, they are deranged and no credence should be given to anything they say.p76
Dont SaySorry, but Im super busy right now and wont have a chance to get into this for a couple of months.
Do you have any idea who I am? Im a top producer whos been in the business for more than 20 years and have sold millions of dollars of property!p76
Dont SayThis was a personal matter and the Commission shouldnt get involved.
Im not required to keep the documents you request.p76
Investigator Case FilesTreated as public record unless disclosure would impede on-going investigation
p77
Possible OutcomesCase is dismissedDoes NOT mean the broker is innocent
Case is NOT dismissedRegulatory Affairs must prove probable cause to CommissionNext step is settlement or hearingp77
Will the BIC be notified if an affiliated agent gets a brown envelope?If PB: Yes, always.If Full Broker: It depends.
p78
All affiliated brokers must notify you immediately upon receiving:
notice of any inquiry or investigation or receipt of any demand letter from an attorney p78Suggested Written Office Policies
Affiliated brokers-respondentsmust submit proposed responsesTO YOU for reviewBEFORE submitting them to the Commission.
p79Suggested Written Office Policies
Training NeedsA complaint may highlight a need for additional training and development.
p80
Avoid disciplinary proceedings byfollowing Laws & Rulesavoiding misrepresentationsdisclosing material factsmaintaining recordsanswering questions and producing documents requested by Commission staff
p80
If and when something goes wrong, dont just fix it make it right!
p80
Section 7: Handling Trust Moniesp81
198
May a broker ever receive a check/negotiable instrument payable to someone other than the broker or the brokers real estate company?
Scenario 1p81
Your firm receives an offer on one of your listings from a buyer with a DDF check written to the Seller-Owner and a EMD check made payable to your firm as escrow agent.
Contract states that EMD must be paid within 5 days of Effective Date.
When must you deposit the EMD check?Scenario 2p81
You are a broker-property manager. A tenant vacates, leaving the property in excellent condition. Your owner-principal insists that you deduct $800 from the TSD to help pay for new carpet. The tenant disputes the $800 deduction.
May you turn the TSD over to the Clerk of Court (based on the Disputed Funds Rule)?Scenario 3p81
ObjectivesAt the end of this section, you should be able to: define trust moneyexplain how a trust account must be designateddescribe the general rule for depositing trust moniesdescribe options for handling disputed fundsdefine deficit spendingp82
ALL brokers must safeguard the money or property of others
Commingling is ILLEGAL
BIC is responsible for the trust accountLicense Law Key Points
p82
203
What IS Trust Money?Funds belonging to othersReceived by a licenseeActing as an agent in a real estate transaction
p83
204
Examples of Trust Moneyearnest money depositstenant security depositsrent paymentsfinal settlement fundsadvance rental depositssales and use taxesfunds used for maintenance of owners properties
p83
205
MUST a Firm have a Trust Account?If Firm is not holding trust monies,no trust account is required.Almost impossible for property management officeto avoid having a trust account.p83
206
If you hold trust monies, how many trust accounts must you have?Sales & Rentals: ONE Account
HOA or POA Management: A separate account for EACH Association.
p83
207
What IS a Trust Account?Separate, Custodial, Demand
p83
208
Proper Account DesignationTrust Account or Escrow Account must appear on ALLBank statementsChecksDeposit tickets
YOUR REALTY COMPANY, INC.TRUST ACCOUNT
DATE _______________________ CURRENCYCOINSCHECKS123TOTAL
YOUR REALTY COMPANY, INC.TRUST ACCOUNTp84
209
Insured Deposits$250,000 per individualp84
License Law defines a Bank as:Federally-Insured DepositoryLawfully doing business in NC That agrees to provide its records to NCREC
p84
211
Tenant Security Depositsmust be in a Trust Accountin a bank IN NORTH CAROLINA.
p84
When to deposit?Trust Monies must be depositedwithin 3 banking days of receipt
p85
213
Exception:EMDs and TSDs may be depositedno later than 3 banking daysof contract acceptanceNO EXCEPTIONS FOR CASH
p85
Who should deposit?PB must deliver trust money to BIC.Limited Nonresident Commercial Licensee must deliver trust money to affiliated NC Broker.
p85
215
May a broker accept a check/instrument payable to someone other than the broker/firm? p85NO, UNLESS
THE CHECK IS PAYABLE TOa seller for a DDF or option feeORa third party escrow agent for an EMD in a sales transaction.p85
Broker must deposit the $$$ in the firms trust accountORdeliver the $$$ to the appropriate payee
NO LATER THAN3 days of contract acceptance.pp85-86If a Broker holds an EMD and/or DDF:
As long as a Broker holds a check/instrument payable to the seller or another escrow agent,
the Broker must follow the Buyers instructions
even after the parties have entered into a legally binding contract.pp85-86
Example 1Your buyer-client writes a DDF check to the owner and an EMD check to the listing company.
May you (as the buyer-agent) receive and hold these checks or must they be delivered to the listing company?
What if the buyer-client gives you cash? p86
Example 2Your firm receives an offer on one of your listings from a buyer with a DDF check written to the Seller-Owner and a EMD check made payable to your firm as escrow agent.
Contract states that EMD must be paid within 5 days of Effective Date.
When must you deposit the EMD check?p86
Disputed FundsRetain in trust account untilWritten release signed by all partiesOR Court OrderOR Deposit with Clerk of Court (after 90-day period with notice per G.S. 93A-12)
p87
222
G.S. 93A-12 ProcedureBroker may pay disputed funds to Clerk of Court ONLY AFTER 90-day written notice to parties.
Parties must initiate action to disburse funds within 1 year.
If neither party initiates action within 1 year, funds are escheated to State.
p87
Release of Funds
p88Must a Broker obtain parties signatures before releasing funds? Answer: It depends.See discussion on page 88.
Residential Tenant Security DepositsDisputed Funds Rule does NOT applyBroker must disburse within 30 days if residential lease and 45 days if vacation rental
p88
225
What should a broker do if a landlord and residential tenant dispute the tenant security deposit?Answer: Follow the lawful instructions of the landlord. p88
What should a broker do if a landlord and commercial tenant dispute the tenant security deposit?Answer: If the TSD is in the Broker's trust account, the Broker must hold the money. Disputed funds rule DOES apply here.p88
May a Broker have anInterest Bearing Trust Account? YES IFparties have given CLEAR & CONSPICUOUS written authorization
p89
228
A Broker must depositsecurity deposits and earnest moniesfor his or her own propertiesin a separate trust account.pp89-90
Example: Betty BrokerBetty personally owns 4 residential rental properties.Betty engages in sales and property management under her licensed firm - Sunshine Properties LLC.
See discussion questions on page 90.pp89-90
230
Deficit Spending
p90
License Law = Consumer Protection
A Broker is in a position of trust.
A Clear audit trail is the best offense AND defense.
Commission will be more lenient if Broker self-reports.
p91
Need more info aboutTrust Account Record-Keeping?Sign up for NCRECs4-hour Basic Trust Account Course.
Also: Visit www.ncrec.gov for videos & resources.p94
233
Section 8:BIC requirementsp?
p97
Scenario 1I had an Active license from 1995-2008.In 2008, I left the real estate business and went to work full-time in another profession. Ive renewed my license and completed CE every year. Now I want to open my own office. What do I need to do?p97
Scenario 2I took the 12-hour BIC Course in April 2014 while I was an associated broker with QRS Realty. I left QRS in October 2014 to open my own sole proprietorship working out of my home.I took the BICUP (Broker-in-Charge Update) course in May 2015.I received a notice from the Commission that I will not receive credit for the BICUP class. Why not?p97
ObjectivesAt the end of this section, you should be able to: define BIC qualification requirementsexplain the purpose and benefit of BIC Eligible statusexplain how to regain BIC status & eligibilityp97
Broker-In-Charge QualificationsActive StatusFull Broker2 years full-time brokerage experience within previous 5 yearsComplete 12-hour BIC course within 120 days of designation (or within 3 yrs prior)
pp97-98
Becoming BIC and BIC EligibleAchieve required experience AND Broker statusTake 12-hour BIC courseSubmit BIC Declaration form within 3 years of course completion*Now BICAND BIC-Eligible*Achieve required experience AND Broker statusSubmit BIC Declaration form*Now BIC*Take 12-hour BIC course within 120 days of designation*Now BICAND BIC-Eligible*ORpp99-101
239
To Maintain BIC Status-EligibilityRenew your license on time($45 by June 30)ANDTake appropriate CE on time(BICUP and one Elective by June 10).
p101
240
1. Return to Active / Current Status2. Submit Activation Form (REC 2.08)3. Attend 12-hour BIC Course4. Submit BIC Declaration Form (REC 2.04)
Next: Submit affiliation forms for all Brokers & PBs.To Regain BIC Status/Eligibility
p102
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