Why must Due Diligence and Earnest Money checks be kept by a NC Real Estate Agent?
I recently was asked by one of our agents to explain why our real estate company requires agents to provide for our electronic files copies of the due diligence and earnest money checks. So I looked up the applicable State of North Carolina License Law and Real Estate Commission Rules as well as referring to the 2012-2013 Broker-in-Charge Annual Review Course Student Manual where Section One covers Record Retention Requirements.
Here are what NCAC 58A .0108 (NC License Law) says should be included in the transaction files.
(1) contracts of sale,
(2) written leases,
(3) agency contracts,
(5) offers to purchase,
(6) trust or escrow records,
(7) earnest money receipts,
(8) disclosure documents,
(9) closing statements,
(10) brokerage cooperation agreements,
(11) declarations of affiliation,
(12) broker price opinions and comparative market analyses prepared pursuant to G.S. 93A, Article 6, including any notes and supporting documentation, and
(13) any other records pertaining to real estate transactions.
While this does not specifically call for due diligence and earnest money checks to be retained, it does say “any other records pertaining to real estate transactions”.
To further clarify this I went to the North Carolina Association of Realtors ® and under their weekly Q&A’s I found what they had to say regarding retention of due diligence and earnest money checks. On November 10, 2015 they said the following:
To answer your question, you are required by Real Estate Commission Rule 58A.0117 to “create, maintain, or retain…copies of earnest money checks, due diligence fee checks, receipts for cash payments, contracts, and closing statements in sales transactions” among many other records. If you do any property management, you would be interested to know that although the Rule requires you to keep copies of security deposit checks, it does not require you to keep copies of tenant rent checks.
We have been told informally by members of the Real Estate Commission’s legal staff that it is not permissible to redact (mark out) bank account numbers on copies of checks that you are required to keep unless the redaction can be reversed.
So here we have a clarification that indeed all real estate firms in North Carolina need to retain copies of due diligence and earnest money checks. Like all other items to be retained, these must be kept for three years.