Prohibited Real Estate Practices in North Carolina

Instructor: Kyle Aken

Kyle is a journalist and marketer that has taught writing to a number of different children and adults after graduating from college with a degree in Journalism. He has a passion for not just the written word, but for finding the universal truths of the world.

The purpose of this lesson is to break down real estate practices that are prohibited under North Carolina law, which includes statutes 93A-6(a)(1), (2), (3), (4), (5), (6), (8), (10), (11) & (15); 93A-6(b), (c), (e) & (f), as well as North Carolina Real Estate Commission Rule A.0504(a) and A.0507.

Prohibited Practices in North Carolina

North Carolina has seen rapid growth in the last decade, especially in the Piedmont region. Jackson Harris is a new real estate agent in Raleigh and just sold his first home. However, he has been notified that the commission is restricting his license because he unknowingly violated the National Association of REALTORS® Code of Ethics.

As a result of an increasing population, the North Carolina Real Estate Commission, the General Assembly, and the National Association of REALTORS® (NAR) Code of Ethics have developed tougher real estate legislation to help prevent direct or indirect fraudulent real estate practices.

Types of Prohibited Practices

North Carolina has limitations in place to protect the integrity of real estate practices. Violations that occur, whether intentional or not, illustrate that a broker or agent has neglected their responsibilities in any of the following categories:

  • Duties to Clients and Customers
  • Duties to the Public
  • Duties to REALTORS®

Brokers and agents who ignore the rules and regulations are subjected to a temporary or permanent suspension of real estate license, a hefty fine, and in extreme cases, jail time.

Duties to Clients and Customers

Under the National Association of REALTORS® (NAR) and the North Carolina Real Estate Commission, active real estate brokers and agencies have mandatory responsibilities to their clients and customers. There are several components that are strictly prohibited; they include:

Misrepresentation and Omission

Brokers and agents must disclose any and all information to clients acquiring or selling property. They may not omit or mislead clients and customers about things such as market value, assessments and evaluations, permits, construction, inquiries, offers, property zoning changes, and appraisals.

Making False Promises

Brokers and agents are prohibited from making egregious promises to clients by offering an expectation that could directly affect the sale or purchase of a property. For example, if Daniel is selling a storefront property and promises his client that after the purchase, his business will see a rise in sales, then Daniel is making a false promise to his client because he cannot prove that this will be a result.

Conflicts of Interest

Brokers may not engage in real estate practice if there is a direct conflict of interest. The three most common conflicts of interest are:

  • Undisclosed dual agency: All agents or brokers who are representing both a buyer and seller must disclose this information to each representative. For example, if Daniel is representing the sellers and the buyers, he must tell them. Failing to disclose that information means that he is in direct violation of the clause.
  • Self-dealing: Self-dealing is when an agent or broker's intent is to make a profit at the expense of a client. For example, Daniel is representing a client who is selling commercial property. He lists the property on the market and doesn't disclose to his client that they are rezoning the area. Daniel decides to purchase the property at the listing price. After the zoning is completed, he sells the property for a significantly higher amount. Daniel's purchase was a conflict of interest and a violation of the misrepresentation and omission statute.
  • Practicing Law: Drafting deeds or sales documents, or offering legal advice to clients is strictly prohibited. All deeds and sales document drafts, along with legal title inquiries must be conducted by a practicing real estate attorney.

Duties to the Public

Real estate agents and brokers have a responsibility to truthfully represent themselves to potential clients and brokering firms. Agents and brokers are violating the rules and regulations if they engage in any of the following:

  • Pursue a course of misrepresentation or false promises
  • Represent more than one broker firm or client without consent
  • Act with unworthiness or incompetence in their representation to clients
  • Create false print or digital advertising that doesn't reflect contact information, the name of the agent or broker, or a working contact number

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