DISCIPLINARY ACTION
The Real Estate Licensing Board revoked the broker's license of JAMES R. BATTLE of Raleigh for failing to account for funds belonging to others, commingling his principal's funds with his own, failing to maintain and deposit funds of others in a trust account, and acquiring an interest in his principal's property without her informed consent.
The Licensing Board suspended the broker's license of GRAHAM L. CASHWELL of Asheville for ninety days for failing to maintain funds of others in a trust account, and transferring earnest money deposits from his trust account to his operating business account before the transactions ever closed.
The Licensing Board censured broker RAE SLOANE COX of Ocean Isle Beach for failing to protect her principal's interests by allowing the purchaser, an attorney with adverse interests to the seller, to draft the critical documents in a seller-financing transaction, without suggesting that the seller seek legal counsel. The clause drafted by the attorney-purchaser varied from the seller's understanding of the agreement, and litigation resulted.
The Licensing Board reprimanded broker JOHN L. KENNEDY of Fayetteville for altering a deed of trust by adding his name as co-beneficiary or payee to secure indebtedness due him from the seller. Although Mr. Kennedy did not act with any intent to defraud any person, his actions in altering a signed document were improper.
LENDING FUNDS TO SELLERS
The Real Estate Licensing Board has expressed concern over transactions where brokers advance funds to their sellers-principals for expenses such as repairs prior to closing. This creates a potentially dangerous situation where the broker is both a creditor and an agent of his principal. Conflicts of interest can easily result.
The Board is advised that in certain communities, brokers have their names added as co-payees or beneficiaries on deeds of trust given to the sellers in owner-financing transactions. This is done to give the brokers security that the funds they lent their sellers will be repaid. Typically, payments on the deed of trust are made to the broker until the seller's indebtedness to him is satisfied.
In addition to being, a potential conflict of interest for the broker, such transactions are dangerous because the deeds of trust generally do not indicate the amount or extent of the broker's interest in the deed of trust. If the deed of trust is payable to *'Seller X and Broker Y" without further elaboration, a legal dispute could arise over whether the seller or broker had received all the funds due him.
The Board cautions licensees to scrupulously avoid any situations where conflicts of interest might arise. If it is absolutely necessary that such transactions be entered into, both broker and principal should consult separate legal counsel. The Board will continue to monitor this area, and may have to consider addressing it by regulation if the problem persists.