Modern Real Estate Practice in North Carolina Eighth Edition Update Hot Sheet

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1 Modern Real Estate Practice in North Carolina Eighth Edition Update Hot Sheet FROM THE PUBLISHER This hot sheet includes necessary updates, changes, and clarifications to Modern Real Estate Practice in North Carolina Eighth Edition Update as it was first printed in April of We would like to thank the people of the North Carolina Real Estate Commission for their careful review of the book and for helping us get the best content possible in front of our students. Changes are listed by page. Underlining and strikethroughs are used in some instances to indicate the changes. Entries marked with an asterisk (*) are of particular importance. Read them carefully. ACKNOWLEDGEMENTS xii The list of reviewers should also include these individuals: Bruce W. Moyer, Director of Education and Licensing, North Carolina Real Estate Commission Stephen L. Fussell, Sr. Consumer Protection Officer, North Carolina Real Estate Commission A few changes are needed to the list of reviewers for the Eighth Edition. Larry A. Outlaw is the former Director of Education and Licensing, North Carolina Real Estate Commission. Tricia Moylan should be listed as Patricia A. Moylan CHAPTER 2: PROPERTY OWNERSHIP AND INTERESTS 21 The last sentence on the page (This makes all beaches in North Carolina publicly owned.) should read as follows: This makes a portion of every beach in North Carolina a public beach under the public trust doctrine. 24 The following statement should be added to the end of the last paragraph on the page. Brokers should refrain from entering statements such as as listed in MLS # or as present in property on [date] in the personal property section as such statements are too vague to protect the parties interest regarding an article of personal property or a fixture. 29 The last sentence of the example (If the church ever decides to use the land for a nonreligious purpose, the property automatically reverts back to the original former owner or the heir without having to go to court.) should read as follows: If the church ever decides to use the land for a nonreligious purpose, the property automatically reverts back to the owner who granted the land as a gift, or that owner s heir(s) Kaplan, Inc. Published by DF Institute, Inc., d/b/a Kaplan Real Estate Education. Printed in the United States of America. All rights reserved. The text of this publication, or any part thereof, may not be reproduced in any manner whatsoever without written permission from the publisher. ISBN: / PPN: MREP_NC_8E_Update_HotSheet.indd 1 7/1/2014 3:38:37 PM

2 2 Modern Real Estate Practice in North Carolina Eighth Edition Update Hot Sheet The second sentence in the second paragraph (The difference between them is in the...) should read as follows: The difference between them is in the language used to create the estate (condition versus time) and whether it reverts automatically to the grantor or whether the grantor has the option to take the property back. The fifth sentence in the second paragraph (It is conveyed as long as.) should read as follows: It is conveyed as long as a specified activity or land use continues. 31 The second sentence in the first paragraph contains a typo. Homeowners insurance should include an apostrophe (homeowner s insurance). 32 A deletion is necessary in the first sentence of the third paragraph, indicated here with a strikethrough. The manner in which the property title is held is important to the real estate broker for two reasons: (1) the form of ownership existing when a property is sold determines who must sign the various documents involved (listing contract, acceptance of offer to purchase or sales contract, and deed) and (2) the new purchaser must determine in what form to take title. The second sentence of the fifth paragraph (An important aspect to concurrent ownership is the unity of possession, which means no one tenant may possess a portion of the property and not allow access to the other tenants.) should read as follows: An important aspect to concurrent ownership is the unity of possession, which means no one owner may possess a portion of the property and not allow access to the other owners. 37 The sixth bullet under Creation of a condominium (whether a managing broker is to be engaged, and) should read as follows: whether a professional manager is to be engaged, and CHAPTER 3: ENCUMBRANCES ON REAL PROPERTY 48 The fifth sentence in the fourth paragraph should say A property owner who applies instead of A property owner that applies 58 The last two bullets under A lien is either of the following: should be preceded with NOTE:. The fourth bullet under A lien is either of the following: (North Carolina Commercial Real Estate Broker Lien allows listing agent in a commercial transaction to secure commission with a lien.) should read as follows: North Carolina Commercial Real Estate Broker Lien Act allows listing agent in a commercial transaction to secure commission with a lien if filed prior to closing. 62 Answer choice c in question 21 (private construction projects on a single-family home do not need to designate a lien agent if the properties are owner-occupied.) should read as follows: a private construction project on a single-family home does not require a lien agent if the property is owner-occupied. MREP_NC_8E_Update_HotSheet.indd 2

3 Modern Real Estate Practice in North Carolina Eighth Edition Update Hot Sheet 3 CHAPTER 5: TRANSFER OF TITLE TO REAL PROPERTY 80 The last sentence of the first paragraph should be deleted [A minor (a person who has not reached the age of majority) does not have legal capacity to transfer title, so any attempted conveyance by a minor is voidable.] 93 The second sentence in the sixth paragraph (A prospective buyer, for example, needs to be sure that the seller can convey title to the property.) should read as follows: A prospective buyer, for example, needs to be sure that the seller can convey clear title to the property. CHAPTER 6: LAND-USE CONTROLS 113 The second sentence under Broker s Duty to Disclose Zoning should read as follows (text added): Brokers working with urban properties both commercial and residential usually have more responsibilities and require more knowledge than brokers working in more rural areas where there are usually fewer zoning classifications and/or restrictions. The third sentence in the second paragraph under Broker s Duty to Disclose Zoning (Purchasers are strongly encouraged to verify with the regulatory power any property use that is material to their desire for the property in question.) should read as follows: Purchasers and tenants are strongly encouraged The fourth sentence in the second paragraph under Broker s Duty to Disclose Zoning (Proper disclosure of zoning and protective covenants should be routinely made before the buyer signs an offer to purchase.) should read as follows: Proper disclosure of zoning and protective covenants should be routinely made before the buyer/tenant signs an offer to purchase/lease. CHAPTER 7: REAL ESTATE BROKERAGE AND THE LAW OF AGENCY 132 The second sentence in the first paragraph (An agent owes his loyalty to the party that employs him; that may not be the party that pays him.) should read as follows: An agent owes his loyalty to the party who employs him; that party may or may not be the party who pays him. *133 The second paragraph should read as follows: While a single agency broker may represent sellers and/or buyers, that broker will not represent both the buyer and the seller in the same transaction because that would require dual agency. Single agency avoids conflicts and results in client-based service and loyalty to only one principal. On the other hand, it traditionally rules out the sale of in-house listings (where the brokerage works with seller and buyer) to prospective buyers. *133 The second sentence in the last paragraph (Unlike agency agreements with ) should read as follows: Unlike agency agreements with a property owner, buyer agency may be oral initially, but must be reduced to writing before the presentation of an offer to any party to the transaction. It is recommended that an offer not be written before an agency agreement is in writing. MREP_NC_8E_Update_HotSheet.indd 3

4 4 Modern Real Estate Practice in North Carolina Eighth Edition Update Hot Sheet *135 The first sentence of the first paragraph (A broker/firm may not intend to create a dual agency situation.) should be preceded by the following: Undisclosed dual agency is not permitted. In order to act as a dual agent, a broker must first obtain written authorization from all parties. The following statement should appear at the beginning of the third paragraph (A more common ): Dual agency is also created when the listing agent and buyer agent work for the same firm, but in different branch offices. 136 Please note that the Commission Rule A.0104 was revised as of July 1, A new Working with Real Estate Agents brochure is available through the North Carolina Real Estate Commission. 145 The first sentence in the second paragraph under Loyalty (Real estate transactions are ideally arm s-length transactions where all parties are dealing from equal footing without bias.) should read as follows: Real estate transactions are ideally arm s-length transactions where all parties are dealing from equal footing without bias (i.e., do not involve family members, friends, or business associates). 147 The first two sentences in the second paragraph (Under the laws of most states, the agent must disclose material facts about the condition of the property. Some states, however, permit a seller disclaimer essentially a statement that the property is sold as is, with no promises regarding its quality.) should read as follows: Under the laws of most states, the broker must disclose material facts about the condition of the property even if the seller chooses not to disclose such facts and even if the seller instructs the broker not to disclose such facts. Some states, however, permit a seller disclaimer essentially a statement that the property is sold as is physical condition, with no promises regarding its quality. The last sentence in the fourth paragraph should be changed as follows (deletion indicated with strikethrough): In addition, the license laws generally require that the broker deposit immediately all trust funds entrusted to the broker in a special trust account (see Rule A.0116). CHAPTER 8: BASIC CONTRACT LAW 164 The second bullet under For Example (Betty writes, signs, and delivers an offer, which Sam then signs. Betty and Sam have an express written contract.) should read as follows: Betty writes, signs, and delivers an offer, which Sam then signs. Betty and Sam have an express written contract as soon as Betty learns that Sam has signed Betty s offer. 168 The second sentence under Agreement in writing and signed. (Most notably, all contracts for the transfer ) should read as follows: Most notably, all contracts for the transfer of an interest in real estate must be in writing, with the only exception being leases of three years or less from the time of their making. MREP_NC_8E_Update_HotSheet.indd 4

5 Modern Real Estate Practice in North Carolina Eighth Edition Update Hot Sheet 5 *172 The following statement should be added to the end of the first paragraph. If there is no available standard or preprinted form drafted by a North Carolina attorney for a certain type of transaction or condition, then the broker should refer the parties to their attorneys to draft appropriate language and/or documents. The first sentence in the first bullet under Auction Sales (The seller reserves the right to stop the bidding if it becomes apparent that the high bid will be unacceptable to the seller.) should read as follows: The seller reserves the right to stop the bidding if it becomes apparent that the high bid will be unacceptable (i.e., too low) to the seller. CHAPTER 9: AGENCY CONTRACTS 182 The last sentence in the second full paragraph should read as follows: In North Carolina, a broker who causes or completes such action without a written agency contract that promises compensation is deemed a volunteer and has no legal claim to compensation (N.C.G.S. 93A-13). The following statement should appear after the second sentence in the last paragraph: A buyer agent must enter into a written buyer agency agreement with a buyer-client before receiving a retainer fee. 183 The following statement should appear after the fourth line on the page: If, after entering into a written buyer agency agreement, a buyer purchases a property without the involvement of the buyer agent, the buyer agent may be able to recover compensation from the buyer-client if the written buyer agency agreement indicates that the buyer will pay the buyer agent in the event that the seller or seller s agent is unable or unwilling to do so. The following statement should appear after the fourth sentence in the In North Carolina paragraph: In order to be eligible to receive a referral fee, the North Carolina broker must have a current, active North Carolina license at the time of making the referral. 185 The first sentence in the second full paragraph (When a particular property is not ) should read as follows: When a particular property is not currently listed with any real estate brokerage firm, a buyer agent may use a protection agreement to secure a commission if that particular property is purchased by the buyer agent s buyer-client. Such an agreement does not create a general listing or any agency relationship between the seller and the buyer agent. The third sentence in the second full paragraph should be deleted: When the broker is an exclusive buyer agent, the broker may use the protection agreement to guarantee the seller s payment of the sales commission without creating any agency relationship with the seller. MREP_NC_8E_Update_HotSheet.indd 5

6 6 Modern Real Estate Practice in North Carolina Eighth Edition Update Hot Sheet The first sentence in the third full paragraph should read as follows: A broker may use a protection agreement when she has a buyer-client who is interested in a specific type of property. 186 Add the following statement to the end of the second paragraph: It is important to remember that this type of agreement is an agreement for real estate brokerage services. As such, it must contain the elements prescribed by Commission Rules A.0104(a) and (b). 198 Typo in the margin note. Should read as follows: Brokers cannot complete the North Carolina Residential Property Disclosure Report for sellers. CHAPTER 11: LANDLORD AND TENANT 238 The last sentence under Fixed or Gross Lease contains an errant period. The fixed sentence reads as follows: This type of lease is most often used for residential rentals but could be used in any type of property. CHAPTER 12: PROPERTY MANAGEMENT 258 In the first line of the fourth paragraph, licensed real estate broker should be italicized. APPENDIX C (These items are available through the North Carolina Real Estate Commission) 535 The License Law was revised as of July 1, The Commission Rules were revised as of July 1, The License Law and Rule Comments were revised as of July 1, MREP_NC_8E_Update_HotSheet.indd 6

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Understanding Whom Real Estate Agents Represent

Understanding Whom Real Estate Agents Represent Before you decide to sell or buy or rent a home you need to consider the following information: Agents Who Represent the Seller Seller's Agent: A seller's