Real Estate Commission’s Conflict of Interest Rules

QUESTION: Does the North Carolina Real Estate Commission have any rules that regulate transactions where a broker has a conflict of interest> If so, what do I need to  know?

ANSWER: In 2014, the North Carolina Real Estate adopted two significant changes to its rule on Agency Agreements and Disclosure – Commission Rule .0104. Two new  subsections were added to Rule .0104.

Subsection .0104 (o) prohibits a broker who is selling property in which he/she has an ownership interest from representing a buyer of that property. This rule does not prohibit  a firm with which the broker is affiliated from representing a buyer of the property, so long as (1) the agent assigned to represent the buyer doesn’t have an ownership interest in the property, and (2) the buyer consents to the representation after full disclosure of the broker’s ownership interest.

Subsection .0104 (p) limits the ability of a listing broker or his/her firm to purchase the broker’s listing. The intended buyer (whether it’s the listing broker or the firm) must first  disclose in writing to the seller-client that the buyer may have a conflict of interest and that the seller-client may want to seek independent counsel from an attorney or another licensed broker. If the listing broker wants to enter into a contract to buy the property, the listing must either be terminated or transferred to a different broker with the firm. On  the other hand, if the firm itself wants to enter into a contract to buy the property, the seller must be advised in writing that the seller has the right to terminate the listing, and  the listing must be terminated upon the seller-client’s request.

According to the Commission’s summary of these rules changes, these two additions to Rule .0104 were needed “… to eliminate the inherent conflict of interest presented by  a broker representing the very party against whom the broker, as an interested party, is negotiating.”