Insight | November 2023

legal QUIZ

BY JOHN WAIT, GENERAL COUNSEL

These questions are based on weekly Q&As published in the REALTOR® Rundown between April 2023 and August 2023.

1. Do I have to use my correct name in advertising?

2. Is the listing firm entitled to a share of the Earnest Money Deposit if a buyer breaches the contract?

3. How do I properly execute a listing agreement to advertise a home as “coming soon”?

4. Does a landlocked landowner have a legal right of access to a public right-of-way?

5. Is it permissible for a broker-in-charge to be involved in a dual agency transaction? What about designated dual agency?

6. Is an email from a buyer’s agent, which is not actually signed by the buyer, sufficient to terminate a Form 2-T contract? Aren’t buyers required to use a termination form provided by NC REALTORS®, as opposed to an email, to terminate a pending contract?

7. What are pay-per-showing services?

8. How does a broker prove the existence of an oral buyer agency relationship?

9. Do REALTORS® outside the MLS have a duty to ascertain the terms of compensation prior to an offer being made?

10. Do the new contract termination notice forms give additional rights of termination to buyers and sellers?

Answers legal QUIZ

1. Yes, with limited exceptions for some nicknames. When a broker fills out their initial application to be licensed, they must provide the Commission their legal name. The name provided is then later used to create the broker’s real estate license, which permits the broker to conduct brokerage activities. Following licensure, all advertising should use the legal name of the licensee, unless the broker has a nickname permitted to be used. For example, a broker named Robert could use the nickname “Bob” in their advertising since it is unlikely to cause confusion. In an opposite example, the nickname “Kevin” is not related to the real name “Mowgli” in a way where the name on the license can be linked to advertisements that contain the nickname. Weekly Q&A dated 4-6-23

2. Yes. Paragraph 11 of the Exclusive Right to Sell Listing Agreement (Form 101) states that any Earnest Money forfeited by reason of a buyer’s default “shall be divided equally between the [listing firm] and the Seller.” Note that if the parties come to an agreement to terminate, or if the buyer terminates as of right during the Due Diligence Period, then the buyer will likely not be in default and the listing firm will have no right to the split. Listing agents are permitted to waive their right to the Earnest Money split if they wish. Weekly Q&A dated 4-13-23

3. When filling out Form 101, agents will want to pay particular attention to Paragraph 10 and fill in the blanks for the dates carefully. Paragraph 10(a) allows a broker to set the date when the property will begin to be marketed or advertised. This date is identified as the Marketing Date and can be the same date as the Effective Date identified in Paragraph 1(b) or some later date. Once the Marketing Date is established, listing agents and sellers should discuss and agree upon a date when the listing shall become “active.” Insert the date the listing will be changed from coming soon to active at the end of the paragraph beside the check box for “Coming Soon” Advertising within Paragraph 10(b). Agents should also fill out any applicable MLS forms for coming soon listings. Weekly Q&A dated 4-20-23

4. No. However, a landlocked land owner may seek access via a “cartway” in some circumstances. A cartway may be available if the owner is using the landlocked property for “the cultivation of any land or the cutting and removing of any standing timber, or the working of any quarries, mines, or minerals, or the operating of any industrial or manufacturing plants, or public or private cemetery, or taking action preparatory to the operation of any such enterprises.” A landlocked owner may also seek an implied easement by necessity in court to establish legal access. It is strongly suggested that legal counsel be employed to pursue either of these remedies. Weekly Q&A dated 4-27-23

5. Yes, so long as the License Law is followed. If the standard agency agreements are used, a BIC can practice dual agency just like any other agent in the firm. This is because under the standard agency forms, certain information may not be transmitted to the other party in dual agency, even if known by the party’s agent. As to designated dual agency, a BIC may be a designated dual agent so long as the broker on the other side is a full broker and not a provisional broker. Rule .0104 expressly prohibits designated dual agency between a BIC and a PB. The reason for this rule is that a BIC must be able to supervise every aspect of a PB’s activities, which means the firewall between designated dual agents cannot be established. Weekly Q&A 5-4-23

6. An email from a buyer agent, nothing else appearing, is not necessarily sufficient. We strongly encourage agents to use the standard unilateral termination forms provided by NC REALTORS®, which have new checkboxes to facilitate a valid termination. Real estate agents do not ordinarily have the authority to sign contracts on behalf of their clients, nor do they ordinarily have the authority to terminate those contracts. Without clear authority, the termination cannot be certain. Weekly Q&A dated 5-11-23

7. There are now platforms for buyer agents to solicit the help of other licensed agents to show their client a property while the buyer’s agent is unavailable. These new pay-per-showing platforms often enlist the help of agents outside the same firm. This can create questions, including but not limited to: (1) what duties does a broker owe the prospective buyers if they have knowledge of material facts on the home they are showing; (2) what duties does the broker owe both parties to the transaction if the broker has knowledge of the property gained by the fact that the listing agreement is with the showing agent’s firm, but the buyer is represented by another firm; and (3) what potential liability is there if the prospective buyer claims the showing agent missed material facts that should have been obvious to a reasonable agent showing the property? Firms should implement policies to address these questions and be sure to carefully review the terms of service for the platform used. Weekly Q&A dated 5-18-23

8. Verbal agreements can be proven by sworn testimony or an affidavit. They can further be evidenced by text messages and emails with the client which show that the agent was performing pursuant to an oral buyer agency agreement. Agents should also consider using the Confirmation of Oral Buyer Agency Relationship form, which can be found in the forms library under “Non-Standard Forms.” It is a sample letter that firms may modify to confirm an oral buyer agency relationship. Weekly Q&A dated 5-25-23

9. Yes. A REALTOR® who is acting as a cooperating broker is obligated by the Code of Ethics to ascertain the terms of compensation before beginning to accept an offer of cooperation. Submission of an offer to a listing firm would constitute such a beginning. See Standard of Practice 3-1 of the Code of Ethics. A REALTOR® outside an MLS is not entitled to the blanket cooperating compensation offered, and therefore any agreement as to compensation should be established prior to an offer being made on a property. Weekly Q&A dated 6-8-23

10. No, absolutely not. The new checkboxes are simply intended to close gaps in the current unilateral termination forms. Buyers and sellers often terminate a contract for reasons other than those addressed or allowed in the Offer to Purchase and Contract (Forms 2-T and 12-T). The terminating party may or may not have a legal basis for terminating. For example, a buyer who believes the seller has breached the contract in some material way may decide to terminate the contract. The fact that they are alleging the seller is in breach of contract does not make it so. The purpose of the new checkbox is to enable the buyer’s agent to provide a form that their buyer client may use to clearly communicate to the seller what they have decided to do. If the parties are unable to work out their differences, it would ultimately be up to a judge or jury to decide whether the buyer in fact had a right to terminate the contract and recover damages based on the seller’s alleged breach. Weekly Q&A dated 7-13-23

STUDY HARD

If you’re not doing so already, be sure to read the Q&As that appear in the REALTOR® Rundown every Monday. It’ll help you on the next quiz!

LEGAL HOTLINE

NC REALTORS® have free, unlimited access to the NC REALTORS® Legal Hotline. Did you know one call to a real estate lawyer costs an average of $250 per hour? With just one call to the Legal Hotline, you’ve paid for one year of NC REALTORS® dues in full. Don’t waste your time stressing over forms, disclosure or landlord/ tenant law. Call the NC REALTORS® Legal Hotline to get quick resolution, so you can return to your clients and your business.

PHONE: 336.294.1415

EMAIL: legalhotline@ncrealtors.org