N.C. regulators declined Wednesday to vote on a rule that would ensure homebuyers know more about their real estate agents' financial interests in selling a home.
The nine-member N.C. Real Estate commission voted to table a proposal requiring real estate agents to disclose in writing any bonuses and other extra incentives sellers are offering before a purchasing decision is made on a home.
The rules change was proposed in October after an Observer investigation on real estate bonuses. It was designed to let consumers know early in the homebuying process if their real estate agents had financial motivation in showing them a home.
Instead, the proposal will be held for further discussion, although commission members scheduled no time for that discussion, essentially leaving the new rule in limbo.
The rule, which had been signed off on by a Real Estate Commission task force, likely would have gone into effect July 1 if approved Wednesday. Now, because of coordination issues with continuing education programs, the rule may not be implemented for more than a year, officials say, if at all.
"We want to go over and look at it again," said commission member Marsha Jordan, owner of Apple Realty in Lincolnton.
Jordan said colleagues around the state had expressed concern about having to reveal to clients what they make beyond the standard commission that's recorded on a buyer's agency agreement.
She and commission chairman Skip Alston, owner of a Greensboro real estate company, denied that the nine-member commission, which is made up mostly of real estate professionals, was putting their colleagues interests' ahead of consumers.
"We've taken the public's concerns seriously," said Alston, who previously has advocated the rules change. "We want to dot every `i' and cross every `t.' "
Real estate brokers are typically paid a commission, or a percentage of the sales price. Some sellers, particularly homebuilders, also pay agencies a bonus for finding buyers. Such extra incentives, which come in the form of cash or gifts, are legal.
State rules currently require agents to tell customers of bonuses before an offer for purchase is made, but that disclosure only needs to be oral , making the rule difficult to enforce.
The rules change proposal was prompted by an Observer report, published in September, that revealed millions of dollars in bonuses paid by homebuilders to Charlotte-area company Realty Place. The investigation found that Realty Place potentially violated state rules and federal law by not disclosing those bonuses properly to customers.
The company's owners have denied wrongdoing, but Realty Place agreed last month to permanently close its doors in the face of a subsequent Real Estate Commission investigation that has found at least 300 to 400 transactions in which bonuses paid to Realty Place by builders were not included on the settlement statement. Failure to disclose any payments on the settlement statement is a violation of federal law.
The Real Estate Commission investigation has expanded to include what one investigator described as a "growing list" of other Charlotte-area real estate companies. Investigators are currently examining a substantial number of bonuses paid by builders and will determine which agents and companies to pursue, said Tom Miller, the commission's director of legal services.
Miller, whose staff drew up the new rule on bonuses, said to commission members Wednesday: "The principles behind this rule are good principles."
Commission member Jordan, in response to the Observer's investigation, said last October that the state ought to require a written disclosure of any bonus before the customer signs an agreement to purchase the home.
"I do think that needs to be changed," she said then. "These things need to be tightened up because too many people abuse things."
On Wednesday, Jordan said she wondered whether the written requirement was necessary. She said that agents she has spoken to rarely, if ever, received bonuses from sellers. The problems described in the Observer's investigation are not rampant statewide, she said. "It seems to be concentrated in urban areas."
When asked if homebuyers in those urban areas, such as Charlotte, needed better protection, she said: "They do... I'm not -- It's not saying we're trashing the whole thing."
Other commission members Wednesday also advocated taking more time to study the rule.
Phillip Fisher, executive director of the commission, said that since the bonus issue was raised seven months ago, no commission members had contacted his staff outside of monthly commission meetings to discuss the proposal's language or study concerns it presented.
An e-mail Fisher sent to commission members earlier this month with updated language for the rule received no responses, he said.
