KeyConceptsfortheEntireCourse (1) (1) (1)

Module 1 – License Law and Commission Rules Part 1—Licensing Rules

  • NC law requires an active North Carolina real estate license for any person or business entity engaging in the business of a real estate broker for compensation or promise of compensation while physically in NC.

  • Types of NC real estate licenses:

    • Broker license

    • Firm license

    • Limited nonresident commercial broker license

  • Broker license statuses:

    • Provisional status

    • Broker status (full broker)

    • BIC Eligible status

    • Broker-in-charge designation (BIC)

  • Seven activities that require a license:

    • Listing (or offering to list) real estate for sale or rent for third party for compensation

    • Selling or buying real estate for third party for compensation

    • Leasing or renting real estate for third party for compensation

    • Conducting a real estate auction

    • Selling, buying, leasing, assigning or exchanging any interest in real estate (including a leasehold) in connection with sale/purchase of a business

    • Referring a third party to a real estate licensee for compensation

    • Negotiating the sale, purchase or lease of real estate for a third party for compensation

  • Eight exemptions to license requirement:

    • Business entity selling/leasing real estate that the entity owns

    • Attorney-in-fact for consummation of contract performance

    • Attorney practicing law

    • Court-appointed individuals (receiver, administrator, bankruptcy trustee, guardian, etc.)

    • Trustee under a written trust agreement or trustee under a deed of trust

    • Unlicensed W-2 employees of licensed property manager

    • Individual property owners

    • Housing authority selling/leasing property owned by the housing authority via its employees

  • NC Real Estate Commission (the “Commission”) = 9 members:

    • 7 appointed by the Governor

    • 2 appointed by General Assembly (one by Speaker, one by President Pro Tempore)

    • At least 3 licensed real estate brokers; at least 2 not involved in real estate or appraisal

  • Purpose of the Commission: protect the public interest in real estate transactions involving brokers; authorities include:

    • Licensing brokers and brokerage firms; registering time-share projects

    • Prelicensing, postlicensing, and continuing education programs

    • Providing education and information to licensees and the public

    • Regulating broker/firm activities; disciplining licensees for violations

  • Commission has authority to:

    • Investigate complaints against licensees

    • Conduct hearings; subpoena records

    • Audit licensee and firm records

    • Sanction brokers (reprimand, suspension, revocation)

  • Provisional broker requirements:

    • Must complete 90 hours of postlicensing education within 18 months from licensure date to maintain eligibility for an active license

  • License expiration and renewal:

    • All licenses expire July 1 each year unless renewed between May 15 and June 30

  • Continuing education (CE):

    • Begin after first license renewal year; CE includes 4 hours Update course + at least 4 hours of approved elective; deadline June 10 each year

  • Inactive status (4 scenarios):

    • Provisional license issued; initially inactive until affiliated with BIC; then active

    • Provisional broker who fails to complete 90 hours postlicensing within 18 months; becomes inactive

    • Provisional or full broker misses CE by June 10; becomes inactive by July 1

    • Firm license without a qualifying broker and active BIC

  • Supervision of provisional brokers:

    • Provisional brokers must be under supervision of a BIC to engage in brokerage activities

  • Notification duties to the Commission:

    • Name/address changes within 10 days

    • Felony or misdemeanor conviction within 60 days

    • Discipline by governmental agency (consent order) within 60 days

    • Restriction/suspension/revocation of notary commission within 60 days

  • BIC Eligible status: conditions to satisfy

    • Be a full broker with active license status (not provisional or limited nonresident commercial)

    • At least two years of full-time brokerage experience (or equivalent) within the last five years

    • Complete the 12-hour Broker-in-Charge course within or up to 1 year before/within 120 days after applying

    • Submit form to Commission

  • Firm requirements:

    • Each office must designate a broker-in-charge

  • Office designation rules:

    • Each office must have only one designated BIC

    • A BIC cannot serve as BIC for more than one office unless the offices share the exact same physical and mailing address

  • Duties of a BIC: key responsibilities include ensuring license renewals, notifying changes, handling advertising, maintaining trust/escrow accounts, retaining records, supervising provisional and affiliated brokers, ensuring adherence to agency agreements and disclosures; must complete Basic Trust Account Procedures course within 120 days of opening a trust account

  • Back to Module 2 summary (transition note) — see Module 2 for details

Module 2 – Basic Real Estate Concepts

  • Three physical characteristics of land:

    • Immobility, Indestructibility, Uniqueness

  • Four economic characteristics of land (SLIP):

    • Scarcity, Location, Improvements, Permanence of investment

  • Two types of land use controls:

    • Public land use controls

    • Private land use controls

  • Advantages of owning real estate:

    • Appreciation in value

    • Favorable tax treatment

    • Rental income

  • Disadvantages of owning real estate:

    • Liquidity issues

    • Requires knowledge/skill to buy/sell/lease

    • Active management required

    • Risk

  • Scope of the real estate market includes:

    • Brokerage (sales and property management)

    • Business brokerage

    • Appraisal

    • Financing

    • Property development

    • Education

    • Professional organizations

    • Government agencies

  • Categories of real estate:

    • Residential, Commercial, Industrial, Agricultural, Special purpose

  • Factors affecting supply and demand:

    • Construction industry (delays/shortages)

    • Government controls

    • Financial policies (mortgage availability)

    • Employment and wages

    • Demographics and population levels

Module 3 – Real and Personal Property

  • Bundle of legal rights:

    • Right of Disposition, Exclusion, Quiet Enjoyment, Possession, Control

  • Appurtenances include:

    • Subsurface rights, Air rights, Right to lateral support, Right to subjacent support, Water rights (Riparian, Littoral, Doctrine of prior appropriation)

  • Boundary changes:

    • Accretion, Reliction, Erosion, Avulsion

  • Terms related to personal property:

    • Chattel, Personalty, Uniform Commercial Code (UCC), Annexation, Severance, Fructus industrialies, Emblements

  • Terms related to real property:

    • Fixtures, Fructus naturales

  • Manufactured home becomes real property when met: four conditions

    • Hitch/wheels/axles removed

    • Attached to permanent foundation on owned land

    • Owner submits affidavit to Division of Motor Vehicles to cancel title and records it when completed

    • After recording, home treated as real property

  • Modular homes: at factory + transit = personal property; assembled on-site = real property

Module 4 – Property Ownership and Interests Part 1—Estates and Title

  • Estates divided into:

    • Freehold estates

    • Nonfreehold (leasehold) estates

  • Freehold estates include:

    • Inheritable estates

    • Non-inheritable estates

  • Inheritable freehold estates:

    • Fee simple absolute

    • Defeasible fee simple

    • Life estate pur autre vie

  • Defeasible fee simple estates:

    • Fee simple determinable

    • Fee simple subject to a condition subsequent

  • Estates not of inheritance:

    • Conventional life estate

    • Marital life estate

  • Four ways to hold title/ownership:

    • Severalty

    • Concurrent ownership

    • Common interest community ownership

    • Trust ownership

  • Concurrent ownership types:

    • Tenancy in common, Joint tenancy, Tenancy by the entirety

  • Four types of common interest community ownership:

    • Condominium, Townhome, Cooperative, Time share

Module 5 – Property Ownership and Interests Part 1—Encumbrances

  • Types of encumbrances:

    • Liens, Easements, Lis Pendens, Restrictive covenants, Encroachments

  • An encumbrance can render title unmarketable

  • Liens: specific vs general

  • Four specific lien types:

    • Mortgage loans, Property taxes and special assessments, Commercial real estate broker liens, Mechanic’s liens

  • General liens include:

    • Judgment liens, Personal property tax liens, State and federal income tax liens

  • Lien priority rules (with exceptions):

    • State income tax liens have priority over all others

    • Real property taxes/special assessments next in priority

    • Mechanic’s liens can jump ahead based on when work or materials were first provided

  • Two primary types of easements:

    • Appurtenant easements

    • Easements in gross

  • Easements in gross can be personal or commercial

  • How easements are created:

    • Express grant, Implication, Operation of law

  • Termination of easements:

    • Cessation of purpose, Release, Extinguishment by merger, Abandonment

Module 6 – Property Taxation and Assessment

  • NC Machinery Act governs taxes, appraisals, assessments, tax listing, duties of tax officials, appeals, tax liens, foreclosure

  • Exemptions: federal, state, local government; nonprofit, religious, educational, charitable organizations

  • Octennial reappraisal: reassessment every 8 years; states may reassess every 4 years horizontally

  • Calendar-year tax timetable:

    • Liens attach to real property on January 1

    • Property listed for tax purposes by January 31

    • Tax rate set and taxes levied by July 1

    • Taxes due and payable on September 1

    • Last day to pay without late fee is January 5 of following year

  • Tax rates expressed as rate per $100 of assessed value:

    • Tax bill = (Tax rate × Assessed value) / 100

  • Some states use mill rate per $1,000; tax bill = (Tax rate × Assessed value) / 1000

  • Assessed value defined as fair market value (FMV)

  • Property taxes may be subject in NC to multiple jurisdictions (county + city/fire/sanitation as applicable)

  • Special assessment charges may be calculated by:

    • Frontage-based methods, unit-based methods, land value methods

  • Special assessments can be paid over months/years in some cases

  • Lien priority for ad valorem taxes and special assessments:

    • State income taxes before ad valorem liens

    • Ad valorem taxes next

    • Federal/local income tax liens after ad valorem liens

    • Special assessment lien after those; mechanic’s liens can jump ahead based on work dates

Module 7 – Transfer of Title to Real Property

  • Brokers should not practice law (no legal advice, drafting deeds, etc.); refer to attorney

  • Proper property transfer requires a complete, accurate property description that uniquely identifies the parcel

  • Ways to describe property:

    • Metes and bounds

    • Government rectangular survey system

    • Reference to a recorded plat (lot and block)

    • Reference to publicly recorded documents

    • Informal references (street address) are not sufficient for a deed

  • Four methods to transfer title:

    • By will, By descent, By voluntary alienation, By involuntary alienation

  • Involuntary alienation examples:

    • Lien foreclosure, Adverse possession, Escheat, Eminent domain

  • Seven essential elements of a valid deed (I Get Paid With Every Deal, Right?):

    • In writing

    • Grantor has legal capacity

    • Property description is accurate and complete

    • Words of conveyance (granting clause)

    • Execution or signature of grantee acknowledged

    • Delivery to and acceptance by grantee

    • Reasonable identification of grantor and grantee

  • A general warranty deed provides five covenants/warranties:

    • Covenant of seisin and right to convey

    • Covenant against encumbrances

    • Covenant of quiet enjoyment

    • Covenant of further assurance

    • Covenant of warranty forever

  • NC excise tax on conveyances: tax = total consideration ÷ 500, rounded up to the next dollar

  • Title assurance components:

    • Title examination process

    • Title insurance

    • Recordation of the deed

  • Title examination components:

    • Chain of title, Abstract of title (not used in NC), Opinion of title

  • Title to real property must be recorded to be enforceable against third parties

Module 8 – Land Use Controls

  • Public land use controls include:

    • Urban/regional use planning, Zoning, Subdivision regulations, Building codes

    • Flood zones and wetlands regulation, Highway access restrictions, Interstate land sales regulations

    • Onsite septic system regulations, Government ownership of land

  • Cities/counties use master plans as part of urban/regional planning

  • Zoning is the primary tool to implement planning goals; early zoning separated uses; modern zoning more complex

  • Enabling act and case law require zoning regulations to:

    • Be enacted as part of a comprehensive plan

    • Address public purposes (health, safety, general welfare)

    • Encourage most appropriate land use throughout municipality/county

  • Zoning regulations should be clear, exercised reasonably, compliant with fair housing laws, and applied similarly to all properties

  • Zoning districts assign a unique zoning code; all property belongs to a district and is subject to rules

  • Subdivisions: listing/listing/sales in new subdivisions require preliminary plat approval before listing and offer activity; final plat approval required before closing

  • Preliminary vs final plat considerations for lots; disclosures and buyer protections described

  • Street disclosure statement required before conveying a lot; streets public vs private must be disclosed; if public, certification of DI highways approval and construction per state standards

  • Brokers representing buyers must investigate street status and maintenance responsibilities; public streets require state/county/municipal maintenance agreements; private streets may require private road maintenance agreements

  • Statewide building code governs construction/renovation; enforcement locally; may be supplemented by local codes

  • FEMA flood zones: flood insurance often required for mortgaged properties in flood zones; not a zoning district but a floodplain designation

  • Eminent domain: government can restrict access with just compensation; access to public roads can impact value

  • Interstate Land Sales Full Disclosure Act (ILSA): protects purchasers in subdivisions; 25+ lots; must register property with HUD and provide full disclosures

  • Sewage disposal regulation: NC requires approved systems (municipal, community, onsite septic); onsite septic requires soil suitability testing (perc test) to determine viability and requirements

  • If a listed property has a septic system, disclose the number of bedrooms allowed by septic permit, not current bedrooms

  • Straight-piping illegal in NC

  • Government ownership = public land use control; private land use controls generally more restrictive than zoning; must be recorded; appurtenant and transfer with land

  • Deed restrictions and covenants: recorded in separate documents; enforceable by private parties; zoning conflicts with deed restrictions favor whichever is more restrictive

  • Private land use controls must be enforced by private parties (HOA or developers); NC license law requires brokers to avoid misrepresentation and disclose land use issues

Module 9 – Environmental Issues in Real Estate

  • Duty to disclose material facts to all parties; failure can lead to disciplinary action, fines, or civil suits

  • Lead poisoning risks; 1992 Residential Lead-Based Paint Hazard Reduction Act (Title X):

    • Requires lead-based paint disclosure addendum for pre-1978 residential properties

    • Requires disclosure of known presence of lead-based paint and copies of reports to buyers/tenants

    • Defines target housing; requires EPA lead paint booklet; 10-day inspection/contract right to cancel; buyer rights

    • Creates broker duties in sale/lease transactions

  • NC Lead-Based Paint Hazard Management Program:

    • Requires renovation/repair/painting providers to be trained and certified in EPA lead practices

    • Applies to private homes and day-care facilities built before 1978

    • Fines up to $750 per day; exemptions for DIY homeowners

  • Asbestos: health risks; encapsulation or removal by certified personnel

  • Radon: action level ≥ 4.0 pCi/L; mitigation recommended by EPA

  • Formaldehyde (UFFI) concerns in some 1970s building materials; remediation possible

  • Mold: material fact when excessive or unusual; remedy = address water source and remediation

  • Underground storage tanks (USTs) and leaks; NC Leaking Petroleum Underground Storage Tank Cleanup Act; state trust fund; liability for current owners to clean up

  • CERCLA (Superfund): liability for cleanup; identify responsible parties; assign costs to former/current owners

Module 10 – Rules for Brokerage Relationships

  • Four categories of law/rules governing brokerage relationships:

    • Common law of agency

    • License Law

    • Commission Rules

    • Contract law

  • Agency relationship exists when an agent is authorized to act for/on behalf of a principal/client; in real estate, the agent is typically the brokerage company

  • Common law of agency classifications (authority):

    • Special, General, Universal agency

  • Authority types for agency:

    • Express authority

    • Implied authority

    • Apparent authority

  • Fiduciary duties (OLD CAR):

    • Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable skill/care/diligence

  • Real estate practitioner role distinctions:

    • Sole practitioner model: agent is the sole practitioner; client is buyer/seller/landlord/tenant

    • Brokerage company model: agent works for company; client is buyer/seller/landlord/tenant

  • Dual agency concepts:

    • Single/exclusive agency (buyer's or seller's) vs. dual agency (both parties by same company with consent)

    • Designated dual agency (assigns one agent to represent each party, with consent)

  • Dual agency limitations and consent:

    • Unintentional dual agency prohibited; explicit consent required for intentional dual agency; explain consequences

  • Formation of agency:

    • Express agreement required (listing, buyer agency, dual agency, property management, tenant representation)

  • Termination of agency:

    • Expiration, full performance, mutual agreement, breach, dissolution of firm, death of practitioner or seller, destruction of property

  • Duties under agency agreements usually end with agency, but may extend for pending transactions, express promises, or self-dealing

  • Material facts include: facts about property; facts affecting value/use/desirability; info about a party's ability to complete a transaction; information of specific importance to a party

  • Eight duties under License Law & Commission Rules:

    • No willful or negligent misrepresentation of material facts; disclose all information agent should have knowledge of

    • No false promises; no undisclosed conflicts of interest; proper trust account handling; competent services; avoid improper conduct; honesty in all dealings; provide copies of agency/transaction documents within 3 days; disclose commissions/referral fees/kickbacks

  • Duties to third parties: general honesty/fairness; avoid misrepresentation; disclose material facts known or should have been known; additional duties related to license law

  • Consequences for breaches: disciplinary action; civil liability; criminal liability; civil liability of client for agent’s misconduct

  • Client duties to the agent: good faith; compensation

  • Prohibited acts by parties: misrepresentation; fraud; failure to provide required disclosures

  • Violations consequences include civil and/or criminal, and potential liability for agent’s misconduct

Module 11 – Disclosure of Brokerage Relationships

  • At first substantial contact, broker must:

    • Provide Working with Real Estate Agents Disclosure (WWREA)

    • Display broker’s name and license number on the document

    • Review WWREA with client and determine agent’s role (buyer/seller/dual)

  • Broker must retain WWREA for 3 years after latest of:

    • If consumer engaged in a transaction represented by broker: later of fund disbursement or conclusion of transaction

    • If consumer did not engage in a transaction: later of WWREA signing, last day broker provided brokerage services, or date agency relationship ended

  • In transactions where broker represents the seller (as seller’s agent or subagent) or buyer, disclosure to the other party must be in writing with license number

  • Buyers’ representation requirements:

    • When representing a buyer, disclose to seller at initial contact; provide written confirmation disclosing buyer representation no later than offer delivery (may be included in the offer)

  • Ownership restrictions:

    • A broker may not represent a buyer in a residential transaction in which the broker has ownership interest

    • For commercial property, representation is permitted only if broker owns less than 25% or buyer provides full written disclosure and consent

  • Material facts not considered material in NC: death or severe illness of occupant; Megan’s Law sex offender status; haunted property reputation

  • Caveat emptor and disclosure:

    • Seller’s duty to avoid fraud; do not mislead to avoid investigations

    • Caveat emptor does not relieve broker obligations to discover/disclose material facts

  • Unfair/Deceptive Trade Practices Act (UDTPA): state law for damages; treble damages possible

  • “As is” condition: seller not obligated to repair; broker must inform seller of duties to discover/disclose material facts

  • Residential Property Disclosure Act (RPOADS) & MOG:

    • Requires sellers to provide two disclosures to prospective buyers regardless of broker involvement (RPOADS; MOG)

    • Rules for timing and rights to cancel if disclosures not provided timely

    • Applies to specified residential types/transactions; with exemptions

    • Brokers must advise clients of seller’s duty to provide disclosures and buyer’s right to terminate if timely disclosures are not provided

Module 12 – Handling Dual Agency

  • Dual agency permitted in NC, but one agent cannot effectively represent opposing interests; duties limited (loyalty, disclosure, reasonable skill/care/diligence)

  • A dual-agent may not disclose:

    • Whether a party would accept a price/terms other than those offered; party’s motivation unless required by statute/rule; confidential information unless required by statute/rule

  • Dual agents must treat each party in a balanced, fair manner; encourage communication between parties

  • Written authorization required to represent more than one party; if oral agreement with a buyer/tenant exists, dual agency authority must be reduced to writing no later than when one party makes an offer to another

  • Designated dual agency as an alternative:

    • Company obtains express written consent from both buyer and seller; designates one broker to represent buyer and another to represent seller; confidentiality controls maintained

    • BIC cannot be designated dual agent if the other designated dual agent is a provisional broker under the BIC’s supervision

    • Names of designated agents must be disclosed to both parties no later than first offer presentation

  • Designated agents may not reveal: price/terms other than those offered, client’s motivation, or confidential information without client’s permission

Module 13 – Rules and Practices for Agency Agreements

  • Do not solicit clients away from other brokers: risks include Commission discipline, ethic violations, civil lawsuits for tortious interference

  • Do Not Call laws: penalties for violations; exceptions