All posts by brian@paterealty.com

SCOTUS Ruling Has Nationwide Impact on Property Rights

April 15, 2024

On April 12, 2024, the U.S. Supreme Court rendered a significant ruling regarding the interpretation and application of the “Takings Clause” as outlined in the Fifth Amendment of the U.S. Constitution.

This ruling, stemming from the case of Sheetz v. County of El Dorado, clarified the extent to which governmental bodies could impose fees and conditions on landowners seeking permits for land use.

In the case at hand, a couple residing in a rural area sought permission to erect a small, 1,800 square foot home on their residential property. However, their application for a permit was contingent upon payment of a substantial fee—specifically, a $23,420 “traffic impact fee” mandated by the county.

Despite the fee being calculated based on a predetermined rate schedule tied to the type of development and its location per the county’s General Plan, it did not directly correlate with the costs associated with the couple’s proposed project.

The landowners, under protest, acquiesced to the fee but subsequently initiated legal action, contending that it constituted an unconstitutional infringement upon their property rights.

While the California courts dismissed their claim, asserting that the Fifth Amendment’s Takings Clause did not extend to takings imposed by legislative bodies, the U.S. Supreme Court agreed to review the case to resolve conflicting interpretations among state courts.

The unanimous decision of the Supreme Court established that the protections afforded by the Takings Clause are equally applicable to regulatory actions undertaken by both legislative bodies and administrative agencies.

This means that governments cannot place unreasonable conditions on land-use permits that effectively deprive landowners of their property rights without fair compensation.

The Court articulated a two-part test, derived from previous cases (Nollan v. California Coastal Commission and Dolan v. City of Tigard), to evaluate the validity of permit conditions:

  • first, the condition must have a clear connection to the government’s interest in regulating land use, ensuring that it serves a legitimate public purpose;
  • second, the condition must be proportional to the impact of the proposed development on that interest, preventing the government from demanding more from the landowner than is necessary to mitigate the effects of the development.

However, the Court’s decision left room for interpretation and disagreement among the justices regarding its implications for future cases.

Justices Sotomayor and Jackson suggested that the legitimacy of a fee should be evaluated based on whether it would be considered fair if imposed outside the permit process.

In contrast, Justice Gorsuch emphasized the importance of individualized assessments in determining whether a fee amounts to an unconstitutional taking.

Justices Kavanaugh and Kagan cautioned that the ruling does not prohibit governments from implementing reasonable fee structures based on the type of development, rather than specific property parcels.

The ramifications of this decision extend beyond the immediate case, potentially influencing the landscape of land-use regulation and permitting nationwide.

Particularly in states like California, where local governments rely heavily on fees to fund public services and infrastructure, the ruling may lead to an increase in legal challenges against hefty fees levied on property owners. Moreover, its impact on environmental regulations, such as those governed by the California Environmental Quality Act (CEQA), remains uncertain.

Here in North Carolina, many municipalities use fees like this for traffic impact analysis, and sometimes require developers to increase road capacity with upgrades necessary to accommodate any future traffic increases resulting from development.

Ultimately, the Sheetz decision underscores the fundamental principle that property rights are entitled to robust protection under the Constitution, regardless of the entity imposing regulatory requirements.

Yet, the nuances of its application and the extent of its influence on future legal disputes will be determined through subsequent judicial interpretation and application.

Fed Faces Inflation Challenge

Despite robust hiring and indications that inflation might stabilize around 3%, rather than the Fed’s target of 2%, questions arise about the central bank’s ability to reduce rates without clear signs of economic slowdown.

With the third consecutive month of inflation exceeding expectations, policymakers may find themselves in a holding pattern, awaiting improved inflation data or evidence of economic weakness they sought to avoid.

The latest report diminishes the Fed’s confidence in achieving its 2% inflation target, a goal that seemed within reach earlier in the year. Fed Chair Jerome Powell had begun the year on a positive note, with inflation declining faster than anticipated by many economists.

However, the recent data presents two potential scenarios. One possibility is that inflation will continue its downward trajectory but with more pronounced fluctuations, allowing for potential rate cuts later in the year. Alternatively, if inflation remains stubbornly around 3%, without significant economic slowdown, rate cuts may be off the table.

While some attribute recent inflation to temporary disruptions caused by the pandemic, others argue that a broader economic slowdown is necessary to curb further price increases. The debate within the Fed highlights the complexity of the inflationary process and the challenges ahead.

As prices continue to rise, consumers may face continued pressure on their wallets, with businesses possibly taking advantage of newfound pricing power. The persistence of inflationary pressures underscores the need for careful policy decisions by the Federal Reserve in the coming months.

If you are considering selling a home, buying a home or investing in real estate in the next year, contact me today and I will help you set up a plan to navigate the rapidly changing market.

Key Terms for a Home Buyer to Know

Before shopping for a home, here are a few key terms a home buyer should know:

Affordability: This measures if you earn enough to qualify for a loan for a typical home based on current prices, your income, and mortgage rates. Higher prices and rates can make it harder to afford a home.

Appraisal: A report done by a qualified third party estimating the value of a property. Lenders use this to make sure they’re not lending more than the home is worth.

Closing costs: Fees needed to finish the real estate deal, paid when you close. Your lender can give you a full list, including points, taxes, and title insurance.

Credit score: A number from 300 to 850 based on your credit history. This helps lenders predict if you’ll pay back loans in the future.

Down payment: Usually 3.5% to 20% of the home’s price, though some programs allow 0% down. Ask your lender about what you qualify for.

Equity: The value of your home beyond what you owe on it. Some homeowners find they have more equity than expected and use it to move.

Inspection contingency: A contract clause requiring an inspection. This helps you learn about the home’s condition and needed repairs.

Mortgage: A loan using your home as security. It can also mean the money you borrow, with interest, to buy your home.

Mortgage rate: The interest rate on your home loan. Changes in rates can affect your monthly payments, so talk to a lender about how it might impact you.

Pre-approval letter: A letter from a lender showing how much they’re willing to lend you for your home loan. This, along with your savings, helps you decide your price range.

If you are thinking about buying a home in the next six months, contact me today to discuss the process and prepare yourself for the buying process.

What Type of Loan Should I Get For My Home?

There are several types of real estate loans available to borrowers, each designed to suit different needs and financial situations:

1. Conventional Loans: These are traditional loans not backed by any government agency, typically requiring good credit and a down payment of at least 3% to 20% of the property’s purchase price.

2. FHA Loans: Insured by the Federal Housing Administration, these loans are popular among first-time homebuyers due to their lower down payment requirements (as low as 3.5%) and more flexible credit criteria.

3. VA Loans: Reserved for eligible veterans, active-duty service members, and their spouses, VA loans are guaranteed by the Department of Veterans Affairs and often allow for 0% down payment.

4. USDA Loans: Offered by the U.S. Department of Agriculture, these loans are designed for rural and suburban homebuyers who meet certain income requirements. They often feature low or no down payment options.

5. Jumbo Loans: These are non-conforming loans that exceed the loan limits set by government-sponsored enterprises like Fannie Mae and Freddie Mac. They are used for high-priced properties and typically require larger down payments and excellent credit.

6. Adjustable-Rate Mortgages (ARMs): With ARMs, the interest rate can change periodically, usually after an initial fixed-rate period. These loans often start with lower initial interest rates, making them attractive to some borrowers.

7. Fixed-Rate Mortgages: With fixed-rate mortgages, the interest rate remains constant throughout the loan term, providing predictable monthly payments. They are popular among borrowers who prefer stability and don’t want to worry about fluctuating interest rates.

8. Interest-Only Loans: These loans allow borrowers to pay only the interest for a specified period, typically the first few years of the loan. After that, borrowers must start paying both principal and interest, which can result in higher monthly payments.

9. Bridge Loans: Bridge loans provide short-term financing to help borrowers “bridge” the gap between the purchase of a new property and the sale of an existing one. They are often used in real estate transactions where timing is critical.

10. Hard Money Loans: These are short-term, high-interest loans typically used by real estate investors for purchasing or renovating properties quickly. They are based on the value of the property rather than the borrower’s creditworthiness.

Understanding the different types of real estate loans can help borrowers choose the option that best fits their needs and financial situation.

S-Line Rail Coming to Wake Forest

I am the chairman of the Wake Forest Chamber Government Affairs Committee and I wanted to share this information on the S-Line coming to Wake Forest and the impact it will have on our community.

On Tuesday, January 9, 2024, the Wake Forest Chamber Government Affairs Committee hosted a delegation from NCDOT, including Rail Division Director Jason Orthner, Brennan Fuqua, interim director of Integrated Mobility Division and NCDOT Division 5 Director Brandon Jones.

The Government Affairs Committee has decided to pass along the information we learned in our meeting with the sole purpose being to educate Chamber members and other citizens of Wake Forest.

The purpose of the meeting was to receive updates on the development of the S-Line from Richmond to Raleigh and the impacts this development will have on the Town of Wake Forest.

The railroad tracks that currently exist in Wake Forest were originally constructed in 1840! Everyone in Wake Forest has heard stories of Wake Forest College students arriving on the train to attend school. The vision for the future rail is far beyond what we have ever seen before.

Mr. Orthner began the meeting presenting the project and its progress. Once completed, the entire corridor will deliver passengers from Washington, DC to Charlotte. It will have direct connections between urban centers estimated to include over 25 million people in 2040.

In addition to providing rail service to Washington, DC faster than it can be driven, this S-Line will also be the backbone of regional multi-modal network connecting Wake Forest with Raleigh and eventually, multiple stops in between.

So far, NCDOT has received grants for over $1.1 billion to help develop the system, including $1.09 billion from a federal/state partnership to construct the line between Raleigh and Wake Forest.

The railroad system will be one of the most advanced in the Southeast. Passenger rail will travel at a rate of up to 110 miles per hour. For that to happen, many improvements will need to be made.

Roadway grade separations will be required. In Wake Forest, these projects include the Rogers Road Bridge over the railroad. This was originally planned to happen in 2020, but due to delays in funding because of the Covid Pandemic, construction has not yet started. The right of way purchases have been made an the surveys are currently being delivered.

Ligon Mill Road will also have a bridge constructed over the railroad and will shift Ligon Mill Road approximately 130 feet south. Once completed, this change will also include a new entrance to the Smith Creek subdivision at Steeple Run Drive.

Holding Avenue will also see a grade separation. There are no current details on exactly how that will be done but it will be a part of the grade separation project.

Crossties will be made of concrete to create a smoother ride and reduce the effect of the trains coming through at higher speeds than the current freight trains through Wake Forest. Current trains travel at a top speed of 20-25 miles per hour. Trains at top speeds of 80 miles per hour will also be lighter providing for less impact on the surrounding environment before slowing down to enter local train stations.

High speed switches will be installed along with separate freight bypass tracks to allow multiple trains to use the same track. Also, freight trains are constructed differently from passenger trains and cannot fit into a train station the way a passenger train does. Therefore, the freight trains will have to have a separate track around the train station to bypass it.

Finally, the train stations will be constructed with high level platforms. If you have ever ridden a train to other metro areas, you have seen the platforms elevated to accommodate the passenger train. That will be done in a similar way here at the station in Wake Forest so that passengers have a smooth entry onto the passenger cars of the train.

People that have moved to Wake Forest in the last 30 years don’t know there used to be an Amtrak Train that came through Wake Forest at 50-60 miles per hour. As trains come into and out of the proposed station near Downtown Wake Forest, they would not be at full speed with the new S-Line in that area.

It is important with rail to keep in mind where time is saved during travel. People think time is saved because the train is traveling at a speed of 90-110 miles per hour at top speed. In actuality, the most time is saved as the train decelerates to enter a station, allows passenger unloading and loading, and then accelerates out of the station. The faster the stops can take place, the more efficiently the train runs. For you NASCAR fans, it is like a pit stop, the faster the better.

What does the future look like?

When the system is completed, Raleigh’s Union Station will be the center of the North Carolina rail system. The current timeline is for this to be completed by 2030.

Eventually the system will allow riders from Wake Forest to not only go to Washington, DC as quickly as one could drive there, but also go to Charlotte with multiple stops along the way in central North Carolina.

The ride to Richmond and Washington, DC will go through Youngsville, Henderson and north through the Virginia countryside.

Other plans are to have the ability to go from Salisbury to Asheville, Raleigh to Wilmington, Charlotte to Kings Mountain, Raleigh to Fayetteville, Raleigh to Winston-Salem and Charlott to Atlanta. In other words, the entire mid Atlantic region of the east coast will be within reach by high-speed train.

What is the timeline for construction?

Currently, surveys for many sections of the project are being completed. When completed, consultants to NCDOT are ready to design the track and depots.

Right of Way acquisitions and moving of some utilities in the path of the tracks will take place in the next two years.

Some elements will break ground in Spring of 2024, with most of those being in the Raleigh area.

Again, the anticipated completion date for the Raleigh to Wake Forest section is 2030.

To learn more about the project and to stay up to date on progress, visit the NCDOT S-Line Raleigh to Richmond Project page at https://www.ncdot.gov/divisions/integrated-mobility/innovation/s-line-study/Pages/default.aspx

Popular Paint Colors for 2024

Popular paint colors for interior spaces include a variety of soothing and versatile shades. These colors are often chosen to create a sense of calm and comfort in the home. Below are some of the colors expected to be popular in 2024. There are some on the list that are timeless and others that are contemporary styles.

  1. Soft Neutrals: Shades like “Serenity” from Sherwin Williams and “Ivory Mist” from Behr are timeless choices that provide a clean and elegant look to any room.
  2. Earthy Tones: Earthy colors like “Rookwood Terracotta” (Sherwin Williams) and “Olive Green” (Behr) are gaining popularity for their warm and inviting feel.
  3. Pastel Hues: Soft pastels like mint green and blush pinks continue to be in vogue, especially for bedrooms and nurseries.
  4. Deep Blues: Navy and indigo blues, such as “Midnight Navy” and “Deep Indigo,” are being used to create dramatic accent walls and add a touch of sophistication.
  5. Warm Whites: Shades like “Antique White” and “Warm Alabaster” are still a favorite for those looking for a clean, airy, and timeless look.
  6. Nature-Inspired Greens: “Forest Green” and “Olive Branch” are bringing the tranquility of nature indoors, particularly in living spaces.
  7. Bold Reds: For those seeking a pop of color, shades like “Crimson” and “Cherry Red” are being used as statement colors in various rooms.

Remember that personal preference plays a significant role in choosing paint colors, so it’s essential to select hues that resonate with your style and the ambiance you want to create in your home. When in doubt, test paint samples on a small area of your wall to see how they look in different lighting conditions before making a final decision.

Twelve Days of Christmas Gifts- How much are they this year?

For four decades, PNC has calculated the expenses of the twelve gifts referenced in the popular holiday song “The Twelve Days of Christmas.” The increase in the annual Christmas Price Index® (PNC CPI) this year is primarily due to rising labor costs, which reflect the health of the US economy.

The 12 contributions that comprise the PNC CPI have increased to $46,729.86 this year, a 2.6% increase over 2022.

Amanda Agati, PNC’s Asset Management Group’s chief investment officer, stated that factors such as the Federal Reserve’s aggressive interest rate hikes and slower economic growth in some major global economies, among other economic influences, have contributed to a lower PNC CPI compared to recent years.

Some industries are suffering more persistent inflation than others, which is outside of the Federal Reserve’s control. On the plus side, earnings are currently expanding faster than the PNC CPI, which should help people enjoy the holiday season, particularly given the current high inflation climate.

Five of the presents had no price increases this year: the Four Calling Birds, Five Gold Rings, Seven Swans-A-Swimming, Eight Maids-A-Milking, and Nine Ladies Dancing. While the price of the Partridge remained constant, the price of the Pear Tree increased by 15%, indicating that home expenses are growing despite the highest mortgage rates since 2000.

Although the prices of some items on the list did not rise, wages for skilled labor, as represented by the performers in the song, have risen, hurting Christmas budgets. While the cost of Nine Ladies Dancing remained stable, the cost of Ten Lords-a-Leaping, Eleven Pipers Piping, and the Twelve Drummers Drumming increased, with performers’ prices increasing by 3.3% this year, much less than the 14.6% increase last year.

If you were to buy all 364 of the products referenced repeatedly in the song, it would cost you $201,972.66 this year, a 2.6% increase over previous year and the first time it has surpassed the $200,000 mark.

Should we list in December or wait until after the first of the year?

I have received this question from multiple clients in the last two weeks.

“Should we list in December or wait until after the first of the year?”

What are the pros and cons of each? How would the home compete on the market?

There are two big advantages to putting the home on the market in December:

  1. During the holidays, homes are usually in their pristine state. Holiday decorations brighten up a home and make it feel more welcoming for potential buyers.
  2. There are fewer buyers which means fewer showings. However, each showing is a higher quality showing because people looking at homes in December are motivated buyers. They likely have to make a move in the next 45-60 days.

People buy homes based on emotions and then justify the purchase to themselves with logic. Because a home is inviting during the holidays, it feels more appealing to those buyers that visit the home.

From a competitive standpoint, many people take their home off the market between Thanksgiving and the New Year. That means that those same buyers who need a home quickly, will have fewer choices. That can be a competitive advantage for a home seller.

Waiting until January to put a home on the market has its positives too. Once a home is cleaned up after the holiday season, people have used the week between Christmas and the New Year to purge the home and get rid of things or make donations to their favorite charities.

As a result, the home is staged better in January than other times of the year and there is less clutter.

The downside to January listings is that other homes will also come on the market during that time period. We have all heard about the “Spring Market.” That Spring Market starts in early January. Homes that go under contract in January often close in March or April and by listing in January you can be one of the first homes available. Because of this, there are more homes to compete against for a seller. That means that the home has to be priced more aggressively and must show well.

The January timeframe is when many buyers enter the market for a new home. That means there are more buyers for the increase in inventory that usually happens in January.

It is up to the seller as to when the house goes on the market. As a real estate agent, it is my job to give you the positives and negatives of each strategy and let you make a decision.

If you would like to sit down for a no-obligation consultation to discuss when the best time to list your house would be, I am happy to have that conversation

Questions and Answers on: WORKING WITH REAL ESTATE AGENTS

When buying or selling real estate, you may find it helpful to have a real estate agent assist you. Real estate agents can provide many useful services and work with you in different ways. In some real estate transactions, the agents work only for the seller. In other transactions, the seller and buyer may each have their own agents. And sometimes the same agent or firm works for both the buyer and the seller in the same transaction. It is important for you to know whether an agent is representing you as your agent or simply assisting you while acting as an agent of the other party.

Do not share any confidential information with a real estate agent or assume that the agent is acting on your behalf until you have entered into a written agreement with the agent to represent you. Otherwise, the agent can share your confidential information with others and this could hurt your ability to negotiate the best deal.

To assist buyers and sellers in understanding the roles of real estate agents, the Real Estate Commission requires agents in sales transactions to (1) review a “Working With Real Estate Agents Disclosure” with you at first substantial contact – before asking for or receiving your confidential information and (2) give you a copy of the Disclosure form after you sign it. The Disclosure form is for your education and protection and is not a contract.

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

IMPORTANT NOTE ABOUT RACIAL EQUALITY AND FAIR HOUSING: The Commission is committed to the principles of excellence, fairness, and respect for all people. It is our goal to ensure that brokerage activities are conducted in fairness to all and to end discrimination in the sale or rental of all real estate. In residential sales and rental transactions, agents must comply with the Fair Housing Act which prohibits discrimination on the basis of the race, color, religion, sex, national origin, handicap, or familial status of any party or prospective party. For more information on the NC Fair Housing Act, you may visit https://www.oah.nc.gov/civil-rights-division/housing-discrimination.

Q: What does the word, “agency,” mean?

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.

Q: What is an agency agreement?

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.

Q: Is there a “standard” length of time for agency agreements?

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.

Q: Is there a “standard” fee for real estate agents?

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.

Q&As for SELLERS

Q: I want to sell my property. What do I need to know about working with real estate agents?

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.

Q: What are a listing agent’s duties to a seller?

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.

Q: What services might a listing agent provide?

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.

Q: How is the listing firm compensated?

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.

Q: If I list my property with a real estate firm that also represents a buyer who wants to buy my property, what happens then?

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.

Q: What is the risk if I agree 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.

Q: How can I reduce the risk if dual agency occurs?

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.

Q: Can I sell my property without hiring a real estate agent?

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.

Q: What happens if the listing agreement expires?

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.

Q&As for BUYERS

Q: I want to buy real estate. What do I need to know about working with real estate agents?

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.

Q: What are a buyer agent’s duties to a buyer?

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.

Q: Must a buyer have a written agency agreement with the agent who represents the buyer?

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.

Q: What services might a buyer agent provide?

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.

Q: How is a buyer agent compensated?

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.

Q: What happens if I want to buy a property listed by the same agent or firm that represents me?

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.

Q: What is the risk if I agree 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.

Q: How can I reduce the risk if dual agency occurs?

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.

Q: What happens if the buyer agency agreement expires?

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.

Q: Can I buy real estate without hiring a real estate 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.

Q: If I am an unrepresented buyer, who pays the real estate agent?

A: Unless you agree otherwise, seller’s agents are compensated by the sellers.

Q: Can the real estate agent who represents the seller require me to hire an agent to represent me?

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. TERMINATION OF AGENCY AGREEMENTS

Q: If I hire a real estate agent or firm to represent me, can I terminate the agency agreement before it expires?

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.

The North Carolina Real Estate Commission

P.O. Box 17100 • Raleigh, North Carolina 27619-7100

919/875-3700 • Web Site: www.ncrec.gov REC 3.45 1/03/22

The SIRP System

Is your house still on the market in this volatile real estate market?

Try using our SIRP system to get your home sold faster.

  • What does SIRP stand for?
    • Strategic Incremental Reduction in Price
  • How does it work?
    • We will agree to lower the price of your home by a set amount every two weeks for a specified period with a maximum reduction in place.
  • Is it right for me?
    • If your home has been on the market more than 30 days and has not had an offer, this system is for your.
    • It is also popular with sellers who have not had enough showings on their home.
    • The goal at Pate Realty Group is to have 4-6 showings every week and have offers after twelve showings.
  • How do you as the seller engage in the SIRP system?
    • If your home is already listed with Brian Pate, contact him and he will get the paperwork approving this process for you.
    • Pick a day of the week (Brian recommends Thursdays) to apply the reductions and how often they will be done.
    • Brian will take care of the paperwork and start the process the following week.