This Q&A brochure assumes that you are a prospective buyer or seller and answers common questions about the various types of agency relationships that may be available to you. It should help you:
• decide which relationship you want to have with a real estate agent
• give you useful information about the various services real estate agents can provide buyers and sellers
• explain how real estate agents are paid
A: The relationship between a real estate agent and the buyer or seller who hires the agent is referred to as an agency relationship, because the real estate agent acts on behalf of (i.e. as an agent for) the buyer or seller (the “client”). In an agency relationship, the agent has certain duties and responsibilities to their client.
A: An agency agreement is a contract between you and a real estate firm that authorizes the firm and its agents to represent you. The agency agreement between buyers and agents is typically called a “Buyer Agency Agreement”; between sellers and agents, a “Listing Agreement.” Be sure to read and understand the agency agreement before you sign it. If you do not understand it, ask the agent to explain it. If you still do not understand, you may want to consult an attorney before signing the agreement. Your agent must give you a copy of the agreement after you sign it.
A: No. The term or length of an agency agreement is negotiable. Real estate agents are allowed to determine their own policies for the lengths of their agency agreements. However, a prospective buyer or seller may request a different length of time than proposed by an agent. If an agreement cannot be reached with the agent, the buyer or seller may seek another real estate agent willing to agree to a different length of time. Every agency agreement must have a definite expiration date.
A: No. The amount or percentage of an agent's compensation is negotiable. Real estate firms are allowed to determine their own compensation policies. However, a prospective buyer or seller may request a different fee. If an agreement cannot be reached with the agent, the buyer or seller may seek another real estate agent willing to agree to a different fee.
A: If you own real estate and want to sell it, you may want to “list” your property for sale with a real estate firm. If so, you will sign a written “listing agreement” authorizing the firm and its agents to represent you as your “listing” agent in your dealings with buyers. The real estate firm must enter into a written listing agreement with you before it is allowed to begin marketing or showing your property to prospective buyers or taking any other steps to help you sell your property. The listing firm may ask you to allow agents from other firms to show your property to their buyer-clients.
A: The listing firm and its agents must • promote your best interests • be loyal to you • follow your lawful instructions • provide you with all material facts that could influence your decisions • use reasonable skill, care and diligence, and • account for all monies they handle for you. Once you have signed the listing agreement, the firm and its agents may not give any confidential information about you to prospective buyers or their agents during the agency relationship without your permission. But until you sign the listing agreement, you should avoid telling the listing agent anything you would not want a buyer to know.
A: To help you sell your property, a listing firm and its agents will offer to perform a number of services for you. These may include • helping you price your property • advertising and marketing your property • giving you all required property disclosure forms for you to complete • negotiating for you the best possible price and terms • reviewing all written offers with you and • otherwise promoting your interests.
A: For representing you and helping you sell your property, you will pay the listing firm a sales commission or fee. The listing agreement must state the amount or method for determining the sales commission or fee and whether you will allow the firm to share its sales commission with agents representing the buyer.
A: You may permit the listing firm and its agents to represent you and a buyer at the same time. This would mean that the real estate firm and all of its agents would represent you and the buyer equally. This “dual agency relationship” will happen if an agent with your listing firm is working as a buyer’s agent with someone who wants to purchase your property. If you have not already agreed to a dual agency relationship in your listing agreement and this is acceptable to you, your listing agent will ask you to amend your listing agreement to permit the firm to act as agent for both you and the buyer. Any agreement between you and a firm that permits dual agency must be put in writing no later than the time the buyer makes an offer to purchase. Both you, as seller, and the buyer must consent in writing to dual agency.
A: Dual agency creates a potential conflict of interest for the firm that represents you, since its loyalty is divided between you and the buyer. It is especially important that you have a clear understanding of what your relationship is with the firm and with the firm’s individual agents, since all of them are dual agents. A dual agent must treat buyers and sellers fairly and equally and cannot help one party gain an advantage over the other party. Although each dual agent owes both their buyer and seller client the same duties, buyers and sellers can prohibit dual agents from divulging certain confidential information about them to the other party.
A: To minimize conflicts of interest, some firms also offer a form of dual agency called “designated dual agency” where one agent in the firm represents only the seller and another agent represents only the buyer. The firm and the firm’s other agents remain in dual agency. This option (when offered by a firm) may allow each “designated agent” to more fully represent each party. Under designated dual agency, each agent designated to represent the seller is prohibited from disclosing (1) that the seller may agree to any price or terms other than those established by the seller, (2) the seller's motivation for selling, or and (3) any information the seller has identified as confidential, unless otherwise required by statute or rule.
A: Yes. In that case, you would be an unrepresented seller often referred to as For Sale By Owner or "FSBO." If you are selling your property without hiring an agent, then any agent involved in your transaction would be representing only the buyer. Do not share any confidential information with the buyer’s agent. If the agent for the buyer asks you for compensation and you are willing to pay that agent, then you should enter into a written agreement that clearly expresses the terms and conditions of your obligation to pay the agent.
A: If the listing agreement expires after you enter into a contract to sell your property, then the listing agent and firm may continue representing you through the date of the closing and you may be responsible for compensating the listing firm in accordance with the provisions of the listing agreement. If the listing agreement expires without your property going under contract, then the listing agent/firm must immediately stop marketing your property unless you first enter into a new listing agreement with the firm.
A: When buying real estate, you may have several choices as to how you want a real estate firm and its agents to work with you. For example, you may want them to represent only you (as a buyer agent). You may be willing for them to represent both you and the seller at the same time (as a dual agent). Or you may agree to let them represent only the seller (seller’s agent or subagent). Some agents will offer you a choice of these services. Others may not.
A: If the real estate firm and its agents represent you, they must • promote your best interests • be loyal to you • follow your lawful instructions • provide you with all material facts that could influence your decisions • use reasonable skill, care and diligence, and • account for all monies they handle for you. Once you have agreed (either orally or in writing) for the firm and its agents to be your buyer agent, they may not give any confidential information about you to sellers or their agents during the agency relationship without your permission. But until you make this agreement with your buyer agent, you should avoid telling the agent anything you would not want a seller to know.
A: To make sure that you and the real estate firm have a clear understanding of what your relationship will be and what the firm will do for you, you may want to have a written agreement when you first begin working with an agent. However, some firms may be willing to represent and assist you initially as a buyer agent without a written agreement. But if you decide to make an offer to purchase a particular property, the agent must enter into a written agency agreement with you before making a written or oral offer. If you do not sign the agency agreement, then the agent can no longer represent and assist you and is no longer required to keep information about you confidential.
A: Whether you have a written or unwritten agreement, a buyer agent will perform a number of services for you. These may include helping you • find a suitable property • arrange financing • learn more about the property and • otherwise promote your best interests. If you have a written agency agreement, the agent can also help you prepare and submit a written offer to the seller.
A: A buyer agent can be compensated in different ways. For example, you can pay the agent out of your own pocket. Or the agent may seek compensation from the seller or listing firm first, but require you to pay if the listing firm refuses. Whatever the case, be sure your compensation arrangement with your buyer agent is clearly indicated in a buyer agency agreement before you make an offer to purchase property and that you carefully read and understand the compensation provision.
A: You may permit an agent or firm to represent you and the seller at the same time. This would mean that the real estate firm and all of its agents would represent you and the seller equally. This “dual agency relationship” will happen if you become interested in buying a property listed with your agent’s firm. If you have not already agreed to a dual agency relationship in your (written or oral) buyer agency agreement and this is acceptable to you, then your buyer agent will ask you to amend the buyer agency agreement or sign a separate agreement or document permitting his or her firm to act as agent for both you and the seller. Any agreement between you and an agent that permits dual agency must be put in writing no later than the time you make an offer to purchase. Both the seller, and you, as buyer, must consent in writing to dual agency.
A: Dual agency creates a potential conflict of interest for the firm that represents you since its loyalty is divided between you and the seller. It is especially important that you have a clear understanding of what your relationship is with the firm and all of its individual agents, since all of them are dual agents. This can best be accomplished by putting the agreement in writing at the earliest possible time and asking any questions that you may have. A dual agent must treat buyers and sellers fairly and equally and cannot help one party gain an advantage over the other party. Although each dual agent owes both their clients the same duties, buyers and sellers can prohibit dual agents from divulging certain confidential information about them to the other party.
A: To minimize conflicts of interest, some firms also offer a form of dual agency called “designated dual agency” where one agent in the firm represents only the seller and another agent represents only the buyer. The firm and the firm’s other agents remain in dual agency. This option (when offered by a firm) may allow each “designated agent” to more fully represent each party. Under designated dual agency, each agent designated to represent the buyer is prohibited from disclosing (1) that the buyer may agree to any price or terms other than those established by the buyer, (2) the buyer's motivation for buying, or and (3) any information the buyer has identified as confidential, unless otherwise required by statute or rule.
A: If the buyer agency agreement expires after you entered into a contract to purchase a property, then your agent may continue to represent you through the date of the closing and you may be responsible for compensating the firm in accordance with the provisions of the buyer agency agreement. If you are not under contract to buy a property when your buyer agency agreement expires, then your agent must immediately stop representing you unless you first enter into a new buyer agency agreement with the agent.
A: Yes. If the real estate agent or firm that you contact does not offer buyer agency or you do not want them to act as your buyer agent, you can still work with the firm and its agents. However, they will be acting as the seller’s agent (or “subagent”). The agent can still help you find and purchase property and provide many of the same services as a buyer’s agent. The agent must be fair with you and report any “material facts” (defects such as a leaky roof) about properties.
But remember, the agent represents the seller—not you—and therefore must try to obtain for the seller the best possible price and terms for the seller’s property and cannot give you advice on buying the property if it will conflict with the seller’s interests. Furthermore, a seller’s agent is required to give the seller any information about you (even personal, financial or confidential information) that would help the seller in the sale of his or her property. Agents must tell you in writing if they are sellers’ agents before they ask you about anything that can help the seller. But until you are sure that an agent represents you and is not a seller’s agent, you should avoid saying anything you do not want a seller to know.
A: Unless you agree otherwise, seller’s agents are compensated by the sellers.
A: No. While it may benefit you to hire an agent, there is no law requiring a buyer to hire a real estate agent to buy real estate.
A: Maybe. An agency agreement is a contract between a buyer or seller and a real estate firm. Most agency agreements do not contain a provision allowing a buyer or seller to terminate the agreement before it expires without the consent of the other party. Generally, one party cannot terminate the agreement without the consent of the other party. If you and the firm both agree to terminate the agreement, then you both should sign a written agency termination agreement. If the agent asks for compensation in exchange for terminating the agreement, then you can agree or disagree or try to negotiate the amount of compensation. If an agency agreement contains a penalty or fee for early termination, the provision specifying the penalty or fee must be set forth in a clear and conspicuous manner. If you are not able to reach an agreement on the termination of the agency agreement, then you may consult your own attorney or simply wait until the agency agreement expires. The Real Estate Commission does not have the authority to terminate agency agreements or to force a real estate agent to terminate an agreement.
RENTING RESIDENTIAL REAL ESTATE
This pamphlet focuses on questions that frequently arise during the landlord-tenant relationship. Although the term “apartment” is used throughout, you should be aware that the questions and answers apply equally to other types of residential rental properties.
For information on tenant security deposits, unlawful discrimination in rental housing, condominiums and townhouses, and other consumer housing issues, contact the North Carolina Real Estate Commission (919/875-3700) and request a free copy of a “Questions and Answers” brochure on any of these topics or visit the Commission’s Web site (www.ncrec.gov) for a pdf version. Other written materials are available from the Consumer Protection Section of the Attorney General’s Office (919/716-6000). If you are a member of the U.S. Armed Forces, you should obtain a copy of the brochure, Questions and Answers on: North Carolina Military Personnel Residential Lease Termination. And for fair housing (discrimination) issues, call the North Carolina Human Relations Commission (919/807-4420) or your local fair housing agency. In addition, you may wish to review Chapter 42 of the N.C. General Statutes and consult a private attorney.
A: No. An oral agreement can establish a landlord-tenant relationship if it is for a term of less than three years from the time the agreement is made and includes the • names of the landlord and tenant(s), • location of the property to be leased, • time period of the lease, and • amount of rent to be paid. [Note: If the lease is required to be in writing, the signature of the party against whom you seek to enforce the lease is required.] However, a written lease gives better protection to both parties, especially in the event of a dispute.
A: It depends. If you pay any money before signing a lease, you should ask for a written agreement indicating exactly what the money will be used for and whether it is refundable. Money you give to “hold” an apartment generally can be kept by the landlord. It is the price you pay to ensure that the landlord does not rent the apartment to someone else. Furthermore, if you have already agreed to rent a particular apartment for a particular term at a particular price, you may have created an oral lease; if so, the money may be considered a security deposit which can be retained by the landlord to the extent necessary to compensate him for your failure to pay rent. And, you may have to pay rent until the lease expires or until the landlord re-rents the property, whichever occurs first. If you have not committed to renting a property, then it is unwise to pay a security deposit because you put this money at risk if you decide not to rent the property.
A: No. Once you sign a lease, you are obligated to the full term.
A: No. Do not rely on a prior oral agreement with the landlord. To make it “legal,” have it written into the lease and initialed by both of you.
A: No. The landlord has no obligation to paint an apartment or steam clean the carpets each time it is rented.
A: Yes. A landlord may lawfully refuse to rent to anyone for any reason other than those specified in the Fair Housing Act. However, the landlord should apply his or her selection criteria consistently with all prospective tenants.
A: Yes. The landlord may charge extra rent and/or a nonrefundable pet fee in exchange for allowing you to keep a pet in the apartment. Furthermore, the landlord may charge more for some types or sizes of pets than for others; or, may prohibit pets completely. Any agreement you have with the landlord about pets should be included in the written lease.
A: Not necessarily. Many tenants assume that their belongings are protected under the landlord’s insurance. But unless the fire or theft was the result of a negligent act by the landlord, he is not responsible for your loss. Therefore, it is generally a good idea for you to purchase renter’s insurance for your protection.
A: Maybe. Many leases give the landlord the right to enter the property to inspect it to see if the tenant is complying with his obligations, to make necessary repairs, to place “for sale” or “for rent” signs on it, or to show it to prospective purchasers or tenants. Still, entry must be at reasonable times and upon reasonable notice. If your lease doesn’t address it, the landlord has no right to enter your apartment during the term of your lease.
A: The landlord is responsible for some repairs, and the tenant for others. For example,
The landlord must:
• Comply with local housing and building codes;
• Do whatever is necessary to put and keep your apartment in fit and habitable condition;
• Maintain in good, safe working order all electrical, plumbing, sanitary, heating, ventilating, air conditioning and other facilities and appliances which he has provided, and promptly repair them when you notify him in writing they are in need of repair (except in cases of emergencies);
• Keep all common areas in safe condition; and
• Provide and install smoke detectors and carbon monoxide detectors and replace batteries at the beginning of your tenancy.
[Note: After the tenancy begins, the landlord may enter a written agreement with you to pay you or reduce your rent in exchange for repairs.]
The tenant must
• Keep the rental unit clean (including toilet, sinks, and baths) and as safe as conditions permit;
• Dispose of trash and garbage in a clean and safe manner;
• Pay the rent as promised and otherwise comply with the lease;
• Not damage (or knowingly let anyone else damage) or remove any part of the property;
• Comply with any duties imposed by local building and housing codes;
• Replace batteries in smoke detectors and carbon monoxide detectors as needed and tell the landlord if a detector needs to be repaired; and
• Leave the unit clean at the end of the lease and in as good condition as when you moved in, except for reasonable wear and tear. [Note: It is important at the beginning of your lease to note the condition of your apartment on a checklist and ask the landlord to initial it. That way, you will not be held responsible for damage that existed when you moved in.]
A: No, not without a court order or the permission of the landlord. Give the landlord a written request for repairs, and keep a copy. If a reasonable time passes and the repairs are not properly done, you may seek a rent reduction in Small Claims Court for the decreased value of your apartment. If the landlord ignores your request to fix the problem and your apartment is uninhabitable, you may be able to vacate the apartment and terminate the lease under a legal theory called “constructive eviction.” Consult a private attorney for advice.
A: Yes. If the landlord receives your rent five days or more after it is due, then he may charge a late fee. The maximum late fee is $15.00 or 5% of the rent, whichever is higher.
A: No. Under North Carolina law, you can do the following things without fear of eviction:
• Complain to the landlord;
• Complain to government agencies (such as housing inspectors and health departments);
• Assert your rights under the lease;
• Organize with other tenants to assert your rights; and
• Sue the landlord to enforce the lease.
However, a landlord may choose not to renew the lease at the end of the current term.
A: No. Unless the lease states otherwise, you are guaranteed the agreed-upon monthly rent for the agreed-upon term of the lease. However, you also give the landlord your guarantee to pay the agreed-upon rent, on time, for that period.
A: No. If your lease provides for a definite termination date, you are typically obligated for the entire lease term, even if you have a good reason for leaving such as illness or a job transfer. Early termination is only excused due to certain military transfers, foreclosures of the property or, in certain instances where the tenant is a victim of domestic violence, sexual assault, or stalking. So, if you leave early and the landlord is unable to re-rent your apartment, the landlord may sue you for the unpaid rent and costs, and/or file a negative credit report against you.
Some leases allow a tenant to terminate the lease early under certain circumstances by giving notice. Check your lease to determine if it permits early termination and the amount of notice it requires. If, for example, your lease allows you to give a 30-day notice to terminate it, typically, you must notify the landlord in writing at least 30 days before the end of the month in which you propose to leave and pay rent through the end of that month.
A: Renting month-to-month is a form of “periodic tenancy.” A periodic tenancy often occurs when a tenant remains in the apartment after the expiration of the initial lease term. Periodic tenancies have no termination date and may be terminated by either the landlord or tenant giving notice to the other. The amount of notice required will usually be set forth in the lease. If there is no written lease, or if the lease does not contain a notice provision, then North Carolina law allows you to terminate a year-to-year tenancy by giving notice to the landlord at least one month before the end of the year; a month-to-month tenancy by giving notice at least seven days before the end of the month; and a week-to-week tenancy by giving notice at least two days before the end of the week.
A: It depends upon the terms of the lease. Most leases provide that when the lease expires, you automatically become a month-to-month tenant and are no longer guaranteed a particular rental rate. In that case, the landlord can increase the rent by any amount by giving you the same notice of his intent to raise the rent that he would be required to give to terminate your tenancy. You may either stay and pay the higher rent or move out.
However, some leases automatically expire at the end of the lease term and have no renewal provision. In that case, the landlord may demand a rent increase in order for you to remain in possession after the expiration of the lease. But if the landlord accepts your rent payment in the usual amount for the month following the expiration of your lease, he may have effectively renewed your lease for another year at the old rate.
A: No.
A: Probably not. If you are a tenant in possession of the property, the law presumes that the purchaser is aware of your tenancy, and requires that purchaser to honor your lease until it expires. However, you could be evicted if you agreed in your lease that you would vacate the premises upon the sale of the property. The new owner will not have to renew your lease when it expires.
A: Tenants residing in a property containing less than 15 rental units, which is being sold in a foreclosure proceeding, may terminate the lease and move out without penalty or breach of the lease. However, the tenant must set the termination date at least 10 days or more after the date of the formal notice of sale from the Superior Court.
Not all individuals who are renting a home want to move out immediately after the foreclosure sale. Since 2009, a federal law allows some leases to survive a foreclosure. In these cases, a tenant has the option to stay until the end of the lease. However, in cases where the tenant is renting month-to-month or the buyer of the foreclosed property intends to live in the property, the law allows the buyer to terminate the tenant’s remaining lease term, but only after giving the tenant a 90-day notice to vacate the home.
A: No, typically a landlord will not refund a portion of the tenant security deposit to a roommate who is moving out if other tenants on the lease remain in the residence. In most cases, the tenant security deposit will be held in trust by the landlord until the last tenant leaves. At that time, the deposit will be refunded, less any lawful deductions, to any remaining tenants leaving the home. If you vacate the residence before the end of your lease, or before your roommates, you should discuss any refund with your roommates directly. (See also Q & A on: Tenant Security Deposits.)
A: Yes. If your name is on the lease, you are legally responsible for the full performance of the lease—even if your roommate’s name is also on it. Many written leases require each tenant to be responsible for all rent that is due, and landlords will usually take legal action against the remaining tenant if his roommate(s) move out and the full rent is not paid.
A: A landlord or his agent may evict you for violating a provision of your lease, but must do so according to lawful procedures. For example, unless your lease provides otherwise, when you do not pay your full rent, the landlord must first make a clear demand on you for payment of the past-due rent. Then, if you do not pay the rent within ten days (or if you have violated your lease in some other way), the landlord may file a formal “summary ejectment” complaint against you in court describing why you should be ejected. The landlord may recover unpaid rent, court fees and other damages from you.
Many leases permit the landlord to shorten the ten day notice period or avoid it altogether by including a “forfeiture” clause. Such clauses provide that the lease terminates if you do not pay your rent within a specified number of days after it is due and may require no notice or less than ten days’ notice before the landlord is permitted to begin the summary ejectment proceeding in court.
At the court hearing, you can, of course, raise defenses. If the magistrate rules in favor of the landlord, you can appeal the decision within ten days. However, you must pay the appropriate rent to the clerk of court while the appeal is pending. If you do not appeal in time, or if the landlord wins the appeal, he can enlist the services of the county sheriff to execute the judgment and evict you. At all times throughout the process, the landlord must use peaceable means to regain his property. “Self-help eviction,” such as changing the locks, removing your possessions, or padlocking your door, is not permitted.
A: Maybe. It depends on the terms of your lease. If your lease does not address the issue and you pay or offer to pay the rent due (and any costs the landlord has incurred), the eviction proceeding is automatically terminated. If the landlord continues the suit, he will be responsible for your future legal fees. But if your lease allows the landlord to terminate your tenancy if you don’t pay your rent on time, he can accept your late rent and still seek to evict you. Most leases today give the landlord this right.