Winston Salem - How Does Foreclosure Affect Tenancy?

 

QUESTION:   We are a property managers. A tenant in a property I manage recently received a formal notice of a foreclosure sale. The tenant called me and said he is not going to pay next month’s rent. He also claims that because of the foreclosure, he is entitled to a refund of his entire security deposit. What should I do?

ANSWER:  Tenants in properties that are involved in foreclosure proceedings have certain legal protections under both state and federal laws that entitle them to either stay or leave, in certain circumstances.

Under North Carolina law, a tenant who resides in residential property having 15 dwelling units or less may terminate his or her lease after receiving what is known as a “notice of sale” issued by the foreclosing lender. To properly terminate the lease, the tenant must give written notice to the landlord (or the landlord’s agent) and the effective date of the termination may be no sooner than 10 days after the date of the notice of sale. Upon termination of a rental agreement in this manner, the tenant is liable for the rent due pursuant to the rental agreement, prorated to the effective date of the termination, payable at the time that would have been required by the terms of the rental agreement.  The security deposit would be handled in the same way you would handle any other security deposit as of the termination of the tenancy.

Unlike the North Carolina statute, which authorizes tenants to terminate a lease, a federal statute known as the “Protecting Tenants at Foreclosure Act” protects tenants who wish to stay in the leased premises. The statute forces the purchaser at a foreclosure sale to recognize an existing lease, as long as that lease is with a “bona fide tenant”. A tenant will be considered bona fide if he or she is not the owner of the premises (or a close family member), if the lease was the result of an arms-length transaction, and if the rent specified in the lease is not “substantially” less than fair market rent. There is an exception for a purchaser who buys a foreclosed property and will occupy the premises as a primary residence. That type of purchaser is permitted to terminate an existing lease but must provide the tenant with a 90-day notice to vacate.

The bottom line for your situation: the fact that a property is “in foreclosure” does not relieve the tenant from the obligation to pay rent as required by the lease, at least until that lease is properly terminated. You should provide the tenant with a copy of the statute (NCGS 42-45.2) and then wait to see if he provides written notice of termination.

© Copyright 2012 - 2024. North Carolina Association of REALTORS®, Inc.

This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

Winston Salem | What do buyers and sellers need to consider when apportioning due diligence fees and earnest money deposits?

 

This is a good one to discuss with me!

QUESTION: I handle residential sales and take filling out our contracts very seriously. I need some guidance regarding how to set a due diligence date when there is no earnest money deposit and how to advise clients when negotiating the DD fee and EMD. What is the relevance of a due diligence period in contracts that do not have any EMD and what should clients know when negotiating these fees and deposits in the standard purchase agreement?

ANSWER: First, you know that leaving the due diligence date blank can create ambiguity as we discussed here, while inserting N/A was discouraged here. Nevertheless, when there is no earnest money deposit, there would be no difference in the outcome of disputes between the parties if they had entered the Effective Date, the Settlement Date, or any date in between. In all cases, the buyer can terminate any time prior to the closing and the seller’s damages are limited to the due diligence fee paid. Further, we know from our article here that buyers who pay nothing in due diligence fees continue to possess all the due diligence rights to inspect and investigate the property. Even after a due diligence period ends, buyers continue to have the right to do inspections and perform their due diligence as discussed here.

Initially, a seller may think it best to negotiate all fees as due diligence, as those fees are typically nonrefundable. However, when the seller does not apportion some amount to earnest money, the buyers can walk away at the closing table and leave the seller knowing they just went through the expense of moving all their belongings out of the property. With an earnest money deposit and reasonable due diligence period established, a seller can keep the buyer invested and more likely to decide whether to proceed before the end of the due diligence period rather than just before closing. Additionally, large due diligence fees are more likely to be litigated by buyers who claim some material misrepresentation was used to induce them into contracting with the seller. Conversely, a large earnest money deposit that could have been refunded after a diligent inspection of the property puts both parties in a better position to weigh their options before closing.

Buyers certainly prefer to have the ability to recoup an earnest money deposit after undertaking inspections and other due diligence rather than committing to the due diligence fee at the outset. Rather than leaving the due diligence date blank, both sides of the transaction should seriously consider apportioning the initial payments between due diligence fees and earnest money deposits. In sum, the best practice is to discuss with your clients the advantages of having both a due diligence fee and an earnest money deposit in their purchase agreement.

© Copyright 2023 - 2024. North Carolina Association of REALTORS®, Inc.

This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

Winston Salem | Are You Looking For Down Payment Assistance?

 

See if the home you are interested in is available for Assistance: Check Home Address

DPR Program Directory

Owning a home is a dream for many, but the financial hurdles of buying a house can often feel insurmountable. One major obstacle is the down payment, typically a significant upfront cost that can deter prospective buyers. However, there’s good news: over 2,300 down payment assistance programs exist across the U.S. to help make homeownership more accessible. In this guide, we’ll explore how these programs work and how you can apply for them.

Understanding Down Payment Assistance Programs

Down payment assistance programs are initiatives offered by various entities, including government agencies, non-profit organizations, and even employers. Their primary goal is to provide financial support to qualified homebuyers, typically in the form of grants, loans or tax credits, to help cover a portion or all of the down payment and sometimes closing costs.

These programs vary widely in terms of eligibility criteria, funding availability, and the amount of assistance offered. Some programs are specifically tailored to first-time homebuyers (40% of programs do not have a first-time homebuyer requirement), while others may target certain demographics or geographical areas. It’s essential to research the specific programs available in your area to determine which ones you may qualify for.

How Do Down Payment Assistance Programs Work?

While the specifics can vary, the general process of accessing down payment assistance typically involves the following steps:

1. Research and Determine Eligibility: You can use the free Down Payment Resource search tool to find available programs and determine your eligibility based on factors such as income, credit score, and home purchase price. 
2. Apply for Assistance: Once you’ve completed your search, you can connect with a mortgage lender and get pre-approved. Or, if you already have a lender in mind, you share your results with your loan officer and complete an application. The application process may involve providing documentation such as pay stubs, tax returns, and bank statements to verify your financial situation. We’ve outlined a few important questions to ask your mortgage lender that can help you get started.
3. Attend a Homebuyer Education Course: Most down payment assistance programs require applicants to complete homebuyer education courses, especially first-time buyers. These courses can be done in-person or virtually and provide valuable information about the homebuying process, financial management, and homeownership responsibilities.
4. Receive Approval and Assistance: If your application is approved, you’ll receive confirmation of your eligibility and details about the assistance you qualify for. This assistance may come in the form of a grant, forgivable loan, low-interest loan or tax credit, depending on the program.
5. Purchase Your Home: Keep in mind that some assistance programs may require you have a home in mind before applying. That’s why it’s essential to work closely with your lender and real estate agent to ensure a smooth transaction.
6. Comply with Program Requirements: Most down payment assistance programs have specific requirements that you must meet to maintain eligibility. For example, you will need to occupy the home as your primary residence for a certain period or fulfill certain homeownership responsibilities.

Tips for Applying for Down Payment Assistance Programs

Navigating the world of down payment assistance programs can seem daunting, but with careful planning and research, you can increase your chances of success. Here are some tips to help you along the way:

• Start Early: Begin researching down payment assistance programs well in advance of your planned home purchase. Some programs have limited funding and may have waiting lists or application deadlines.
• Improve Your Credit Score: A higher credit score can increase your chances of qualifying for assistance and securing favorable terms. Take steps to improve your credit by paying bills on time, reducing debt, and correcting any errors on your credit report. 
• Gather Documentation: Be prepared to provide documentation of your income, assets, and financial history when applying for assistance. Having this information readily available can streamline the application process.
• Seek Professional Guidance: Consider working with a HUD-approved housing counselor, mortgage lender or real estate professional who has experience with down payment assistance programs. They can help you navigate the process and identify the programs that best suit your needs.
• Stay Informed: Keep abreast of changes to down payment assistance programs and eligibility requirements in your area. Subscribe to newsletters, attend workshops, and regularly check program websites for updates.

What Are You Waiting For?

Down payment assistance programs can be a valuable resource for prospective homebuyers, helping to make homeownership more attainable. By understanding how these programs work, you can increase your chances of successfully accessing assistance and achieving your goal of owning a home. With careful planning and diligence, the path to homeownership can become a reality.

Winston Salem | Contract Questions Regarding Fixtures and personal property

 

QUESTION: Is a free-standing refrigerator included as part of the sale if it’s advertised in MLS but not identified in the Offer to Purchase and Contract?

ANSWER: No. Buyers and sellers are not MLS participants, and nothing in an MLS listing magically becomes a part of any contract between a buyer and seller. The Contract also specifically provides that it contains the entire agreement of the parties.

QUESTION: Is a utility building that is not on a permanent foundation included as a part of the sale if it’s not listed as an exception in the Offer to Purchase and Contract?

ANSWER: Yes. “Utility building” is on the list of items in paragraph 2(b) that the buyer and seller agree will be included as a part of the sale unless excluded if they are present on the property. The fact that the utility building is not on a permanent foundation is irrelevant in this situation.

Winston Salem | What About Last Minute Due Diligence Repair Requests

 

QUESTION: More and more it seems that buyers are waiting until the last minute – sometimes literally – of the Due Diligence Period to submit their repair requests. It is very frustrated with this kind of negotiation tactic.  What can we do about this problem?

ANSWER: We have previously written here and here and here that a buyer should not wait until the last minute to make their repair request. Given the disadvantage to the  buyer when the repair request is made last minute, we are not sure how this could be a “negotiation tactic” that actually helps the buyer. Nevertheless, if the seller does  receive a last minute request, there are several ways to approach the issue.

First, the seller could agree to the repairs they feel comfortable with and proceed with the transaction. Once the Due Diligence Period ends, the buyer cannot walk away for  any reason or no reason. Since the Earnest Money Deposit is at risk for the buyer, the seller can complete the repairs knowing that the buyer has more to lose if they  consider terminating the transaction.

Second, the seller can decline to perform any repairs at all. In cases where the buyer is submitting a repair request quite literally minutes before the end of the Due Diligence  Period, the seller will not have time to review all the requests and make their own evaluation. Declining to make repairs will put the ball back in the buyer’s court and make  them decide whether the take the property “as-is.”

Brokers should note that there is nothing in the contract that requires repair requests to be made at a certain time. Repairs can be made during or past the Due Diligence  Period, even though buyers are encouraged to submit their requests early to ensure the agreed-upon repairs are done properly as required by the Offer to Purchase and  Contract (Form 2-T). The seller is under no obligation to make repairs under Form 2-T unless they agree in writing to do so. Informing your seller of these parts of the Form 2-T at the outset of the transaction will help them make a better-informed decision should the buyer make a last minute request.

Release Date: 10/4/2018

© Copyright 2018 - 2024. North Carolina Association of REALTORS®, Inc.

This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

Winston Salem - Should You Sell Your House As-Is or Make Repairs?

 A recent study from the National Association of Realtors (NAR) shows most sellers (61%) completed at least minor repairs when selling their house. But sometimes life gets in the way and that’s just not possible. Maybe that’s why, 39% of sellers chose to sell as-is instead (see chart below):

If you’re feeling stressed because you don’t have the time, budget, or resources to tackle any repairs or updates, you may be tempted to sell your house as-is, too. But before you decide to go this route, here’s what you need to know.

What Does Selling As-Is Really Mean?

Selling as-is means you won’t make any repairs before the sale, and you won’t negotiate fixes after a buyer’s inspection. And this sends a signal to potential buyers that what they see is what they get.

If you’re eager to sell but money or time is tight, this can be a relief because it’s that much less you’ll have to worry about. But there are a few trade-offs you’ll have to be willing to make. This visual breaks down some of the pros and cons:

Typically, a home that’s updated sells for more because buyers are often willing to pay a premium for something that’s move-in ready. That’s why you may find not as many buyers will look at your house if you sell it in its current condition. And less interest from buyers could mean fewer offers, taking longer to sell, and ultimately, a lower price. Basically, while it’s easier for you, the final sale price might be less than you’d get if you invested in repairs and upgrades.

That doesn’t mean your house won’t sell – it just means it may not sell for as much as it would in top condition.

Here’s the good news though. In today’s market, as many as 56% of buyers surveyed would be willing to buy a home that needs some work. That’s because affordability is still a challenge, and while there are more homes for sale right now, inventory is lower than the norm. So, you might find there are a few more buyers who may be willing to take on the work themselves.

How an Agent Can Help

So, how do you make sure you’re making the right decision for your move? The key is working with a pro.

A good agent (Contact Me) will help you weigh your options by showing you what comparable homes in your area have sold for, what updates your neighbors are making, and guide you in setting a fair price no matter what you decide. That helps you anticipate what your house may sell for either way – and that can be a key factor in your final decision.

Once you’ve picked which route you’re going to go and the asking price is set, your agent will market your house to maximize its appeal. And if you decide to sell as-is, they’ll call attention to the best features, like the location, size, and more, so it’s easy for buyers to see the potential, not just projects.

Bottom Line

Selling a home without making any repairs is possible in today’s market, but it does have some trade-offs. To make sure you’re considering all your options and making the best choice possible, have a conversation with a local agent. 

Winston Salem | True Or False Regarding Contract to Purchase

 

 

Question

Under the Offer to Purchase and Contract (Form 2-T), if a party fails to perform a contractual obligation prior to closing, that obligation remains binding on them after closing. True or False?

Answer

False, unless the parties agree in writing that the obligation remains binding after closing or the obligation is, by its nature, one that must be performed after closing. See paragraphs 4(h) and 18 of Form 2-T. Virtually all obligations imposed on the parties by Form 2-T may be performed prior to closing. Those obligations do NOT survive closing unless the parties agree otherwise. 

Winston Salem | What are the buyer’s options when the seller removes a broken built-in appliance?

 

 

Let me know how I can help with all your real estate needs.  

QUESTION: Only a few days before closing, my clients learned that the seller had removed a beautiful built-in, cabinet front refrigerator and replaced it with what looks to be a used, freestanding stainless-steel model of significantly less value. When I asked the listing agent about the replacement, I was informed that the refrigerator had died and that the seller replaced it with one that could fill the opening. The refrigerator was not listed anywhere in the purchase agreement and I’m unsure if that was a mistake. My clients felt the built-in refrigerator brought the whole kitchen together and have learned that a replacement will cost as much as $15,000. With closing only a few days away, what can we do?

ANSWER: Form 2-T, paragraph 2(b), specifies that all “built-in appliances” are included in the sale as part of the Purchase Price. A refrigerator that is “panel ready” or “counter depth” may look like a built-in refrigerator to an untrained eye. Therefore, we would always recommend that agents specifically identify, within the purchase agreement, any appliances that the buyer wishes to be included in the sale.

If the seller had opted to leave the “dead” built-in refrigerator in place and simply notified all parties that the refrigerator was no longer working, the buyers would have two options under their contract. One, the buyers could terminate the agreement under paragraph 11 of Form 2-T by giving notice of termination. Termination under this paragraph would entitle buyers to a return of any due diligence fee and earnest money deposit, as the home would not be in as good or better condition as on the date of their offer. Two, if the damage were covered under any insurance policy, the buyers would be entitled to purchase the home and receive any benefits or payment under of any insurance claim filed by the seller. Note, however, that paragraph 11 does not allow the buyers to seek reimbursement of any other expenses incurred during their due diligence. The reasoning for this limitation is that the seller is not considered to be in breach of the agreement if conditions of the property have merely changed and should not be penalized by having to pay buyer expenses.

Once the seller removed the refrigerator, however, there is a good argument that the seller breached paragraph 2(b) of the contract to purchase. By removing the appliance, the seller has taken from the buyers the option to have the refrigerator repaired. Furthermore, the replacement is materially different and less desirable than the original. Under paragraph 23 of Form 2-T, the buyers would have the right to terminate the contract and seek reimbursement of their expenses incurred to investigate and prepare for the purchase of the property. If the parties are unable to reach a resolution prior to closing, you should advise your clients, in writing, to seek legal advice to fully explore their options to help make the decision on how to proceed with the purchase of this home or terminate the agreement and recover their damages.

© Copyright 2023 - 2024. North Carolina Association of REALTORS®, Inc.

This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

Winston Salem | If a buyer indicates he won’t close, when can a seller terminate the contract?

 

This is just a hypothetical scenario

QUESTION: I represent a seller and the listed property is under contract. The due diligence period has expired, and the settlement date is 30 days away. Yesterday, the buyer’s agent sent me an email stating that his client will not proceed with the purchase. However, the buyer is now refusing to sign a mutual termination agreement unless the seller releases the entire earnest money deposit back to the buyer. The buyer is not claiming any legal right to terminate the contract unilaterally. Apparently, he is hoping that the seller will give up his contractual right to the deposit and terminate now so that he doesn’t have to wait 30-45 days to put his property back on the market. Does my seller have to wait until the Settlement Date, or maybe even 14 days after the Settlement Date, to terminate the contract and re-market the property? Or can he terminate now based on what the buyer agent has told me?

ANSWER: There is a concept in contract law called anticipatory repudiation of a contract that could potentially be applicable to your situation, but it depends a lot on the facts. The idea is that if, before the time arrives for performance (i.e., the settlement date), the buyer repudiates his obligation to perform under the contract, the seller can treat that repudiation as a breach of contract and legally terminate the contract early based on that breach. Under North Carolina law, for a party’s repudiation to result in a breach of contract, that party must express, through words or conduct, a positive, distinct, unequivocal and absolute refusal or inability to perform. This is a high standard. It means that your seller would need very strong evidence that the buyer is absolutely refusing to perform his contractual obligations before he could safely terminate the contract prior to the Settlement Date. If your client wants to go that route, you should strongly encourage him to first seek legal guidance.

If your evidence of repudiation is not strong enough, the next issue is whether the seller has to wait 14 days after the Settlement Date before terminating the contract, as provided in the Delay in Settlement/Closing paragraph of the Contract. Time is not of the essence regarding the Settlement Date. Under North Carolina law, that means the Settlement Date is considered a target date, and a party would have a reasonable time following that target date, under the circumstances, within which to complete the transaction. Your seller can argue that the buyer doesn’t deserve any additional time to complete settlement and closing because he does not meet paragraph 12’s definition of a Delaying Party. Most significantly, the buyer does not intend to complete the transaction. If the buyer is not entitled to a delay in settlement, the buyer’s failure to close on the Settlement Date would arguably be considered a breach of contract. If your seller wishes to make this argument, and terminate the contract prior to the expiration of the 14-day period, you should strongly encourage him to first consult with an attorney. Otherwise, the safest course is to wait the 14 days before terminating.

© Copyright 2020 - 2024. North Carolina Association of REALTORS®, Inc.

This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

Winston Salem - Is seller’s intended refusal to sign a deed a material fact?

                                                

QUESTION:  I listed a property for sale that is owned by four siblings. All four of the siblings and their spouses signed the listing agreement. An offer was received several weeks ago and, after some negotiation, all four siblings and their spouses signed a contract agreeing to sell the property. We are still in the due diligence period and the buyer is still investigating the property. One of the siblings (I’ll call him Joe) just called to tell me that he is upset with the other sellers and that he does not intend to sign a deed to the property. Is Joe’s stated intention a material fact that I need to disclose to the buyer?

ANSWER:  Clearly, Joe has time to change his mind prior to Settlement and sign a deed. For this reason, there is an argument that Joe’s stated intention is somehow different from other types of existing facts. In our view, this argument is not persuasive. The information you have received from Joe is a fact, and it is sufficiently material that you need to promptly disclose it to not only to the buyer but to Joe’s siblings

The North Carolina Real Estate Commission has identified three categories of facts that must be disclosed to all parties if a licensed agent has knowledge of those facts: (1) facts about the property itself, (2) facts that relate directly to the property, and (3) facts that relate directly to the ability of a principal to complete the transaction.

In its Real Estate Manual, the North Carolina Real Estate Commission gives several examples of “facts that relate directly to the ability of a principal to complete the transaction”. One such example is the seller’s inability to convey clear title.

Virtually all real estate contracts require the seller to execute and deliver to the buyer a General Warranty Deed  conveying fee simple marketable and insurable title (see paragraph 8(g) of Standard Form 2-T). Your clients will not be able to meet this obligation unless all four siblings (and their spouses) sign the deed. Since you now have information that calls into serious question the ability of your principals to complete the transaction, you should promptly disclose that information to the buyer and to your own clients.

Release Date: 3/29/2016

© Copyright 2016 - 2024. North Carolina Association of REALTORS®, Inc.

This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

Winston Salem - What are an agent’s duties regarding disclosure of an off-site condition?

 

QUESTION: A broker in our office who represents a buyer recently put a home under contract. During the home inspection this week, the buyer was standing outside the house and heard a train go by. It was not visible but the buyer was upset that the existence of a railroad track in close proximity to the back side of the property was not disclosed on the Residential Property and Owners’ Association Disclosure Statement. The seller checked the “No Representation” box on all the questions on the Disclosure Statement.

The buyer intends to terminate the contract. It is within the Due Diligence period, so the buyer has the right to do so and receive a refund of his Earnest Money Deposit. However, the buyer also wants to recover his Due Diligence Fee and the home inspector’s fee because he feels that the presence of the railroad track should have been disclosed and that the sellers have somehow breached the contract. Does the existence of an active train track (that is not visible from the house) have to be disclosed by the seller? Did the seller breach the contract? If not, does the buyer have a claim for damages against the listing agent?

ANSWER: Under North Carolina law, sellers have very limited disclosure obligations to buyers. While sellers may not misrepresent facts, or fraudulently conceal a defect in their property, the general rule is caveat emptor, let the buyer beware. Here, there is no evidence that the seller has misrepresented anything nor actively concealed the existence of the track. As a result, we do not believe that the seller has breached the contract.

Unlike sellers, REALTORS® are required both by statute and by the REALTOR® Code of Ethics to disclose all material facts to their own clients and to the other parties involved in a real estate transaction. Licensees are subject to disciplinary action and potential civil liability for failing to disclose a material fact.

In some cases, it is not easy to determine whether a fact is sufficiently “material” to require disclosure. The North Carolina Real Estate Commission has identified three categories of facts that must be disclosed if the agent has knowledge of those facts OR if the agent should reasonably be aware of those facts: (1) facts about the property itself, (2) facts that relate directly to the property, and (3) facts that relate directly to the ability of a principal to complete the transaction.

The second category, facts that relate directly to the property, are typically external factors that affect the use, desirability or value of a property. Examples given in the Real Estate Commission’s Real Estate Manual are a pending zoning change, the existence of restrictive covenants, plans to widen an adjacent street, and plans to build a shopping center on adjacent property.

In determining whether a particular “external factor” sufficiently affects the use, desirability or value of a property so as to require disclosure, a reasonableness standard should be applied. Ask yourself whether the external factor would affect a reasonable prospective buyer’s decision to buy the property. In the situation you have described, the close proximity of the track to the listed property militates in favor of disclosure because the noise produced by passing trains could certainly be substantial enough to affect the normal use and enjoyment of the property.

Agents on both sides of the transaction have a duty to discover facts which, through reasonable diligence, should be known to them. When those facts are material, they must be disclosed. Here, the existence of an active railroad track adjacent to the subject property likely should have been discovered by both agents and disclosed to the prospective buyer BEFORE the buyer made an offer for the property. Thus, in our view, both agents (and possibly their firms) face potential disciplinary action and/or civil liability for failing to disclose the track to the prospect before the property went under contract.

© Copyright 2013 - 2024. North Carolina Association of REALTORS®, Inc.

This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

Winston Salem | Is a back-up contract a material fact?

 

Roby Robertson,   Serving the entire Winston Salem area with knowledge, patience and always putting clients first! 

QUESTION: My client is under contract to buy a home in a popular neighborhood. During the due diligence period, we submitted a list of proposed repairs to the seller, and the seller refused all of them. My client told me to inform the seller that if he would not perform the repairs, then my client would terminate the contract. The listing agent responded by telling me that the seller had already accepted a back-up contract, and that if my buyer would like to terminate, the seller would just proceed with the back-up contract.

I confronted the listing agent because he never informed me of the back-up contract. The listing agent replied that the back-up contract is not a material fact and that he had no duty to disclose it. Is the listing agent correct?

ANSWER: In our opinion, the listing agent is correct in this situation. Generally speaking, a material fact is any important or relevant fact to the issue at hand. The North Carolina Real Estate Commission has stated that in real estate transactions, material facts fall into several categories: (1) significant facts about the property itself; (2) facts relating directly to the property, such as a pending zoning change; (3) facts concerning a contracting party’s ability to complete the transaction; and (4) facts that are known to be of special importance to a party. If a fact falls into one of these categories, then the fact is a material fact that must be disclosed to any party an agent deals with, even if the party is not represented by the agent.

NC REALTORS®’ Back-Up Contract Addendum (Form 2A1-T) states: “It is a condition of this Back-up Contract that the Primary Contract is terminated as described below before Buyer and Seller shall be obligated to perform under this Back-up Contract.” Accordingly, a back-up contract can only become effective if the primary contract fails to close. Since the back-up contract does not affect the property itself or limit a seller’s ability to complete the transaction, it is not a material fact that would need to be disclosed to a buyer.

Release Date: 3/28/2017

© Copyright 2017 - 2024. North Carolina Association of REALTORS®, Inc.

This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

Winston Salem - Understanding What Makes Your Home Sell

 

Selling your property is a big decision so it's critical to work with a trustworthy professional who will get the job done right.

Feel confident that you are working with someone who uses the best tools and technology to sell your property for the most amount of money in the least amount of time. Rest assured that the selling process will be managed with transparency and constant communication, knowing every detail will be taken care of.

Your property will be marketed using strategies that target where buyers are actively searching, both online and in person. Your listing will stand out with captivating photography, compelling content, and a flawless presentation to impress buyers both online and in person.

        The Selling Process

Let's meet and talk about your selling goals

By gathering a clear understanding of your goals and learning the details of the selling process, you’ll know what to anticipate. Using comparable property data determines the optimal list price and projected time on the market. Innovative technology is used to market your listing and manage the entire transaction, guaranteeing every detail and question is addressed. And, you’ll receive updates through every step of the process so you are fully informed about the progress of your home sale.

Use the most accurate methods to price your home

The right price for your property is determined by current market conditions, not by an agent, seller, or buyer. Using up-to-date market data to compare your property to 5 active, 5 pending, and 5 recently sold properties combined with in-depth knowledge of market statistics ensures your property is priced and marketed correctly so it sells when you want for the price you deserve.

The best photography, virtual tours, 3D walkthroughs and videos

Today's home buyers have access to more information than ever. They know which homes they want to see and have already rejected listings with too few or subpar photos. It is absolutely vital that your online listing includes high-impact photography to make lasting first impressions and compel buyers to schedule showings.
Creating a virtual tour or 3D walkthrough allows potential buyers to see more than photos, providing an immersive experience that showcases the full layout of the property right from the comfort of their device. Virtual tours are a key element of a comprehensive and successful home sale strategy.

92% of buyers search for properties online

The best strategies and resources market your property where buyers are looking. The more buyers who see your property, the faster it sells. Your property will be marketed across multiple channels, including agent websites (this one included), popular home search portals, search engines, and social media platforms. This multi-faceted approach and extensive exposure will move your listing from active to sold in the least amount of time.

Contact me to discuss all facets of selling your home.

Winston Salem | Duty to disclose material facts – items listed on repair request

Have a question about selling your home?    We have the experience and the resources to do the ethical thing! 

QUESTION: I represent a seller. The house went under contract and the buyer engaged a home inspector. During the due diligence period, the buyer submitted a Due  Diligence Request and Agreement (Standard Form 310-T) that listed several requested repairs. Some of the repairs were significant (an HVAC unit that must be replaced)  and some were extremely minor (door stops that needed adjusting). The parties were unable to reach agreement on the repairs and the buyer terminated the contract. Now  that the house is back on the market, do I have to disclose all of the items that were listed on the first buyer’s Form 310-T, even the minor ones?

ANSWER: The general rule, which is codified in both the North Carolina Real Estate License Law and the REALTOR® Code of Ethics, is that real estate agents must make a  full and prompt disclosure of all facts that are material to a transaction they are involved in. The duty of disclosure relates not only to material facts the agent knows but also  to material facts about which the agent should reasonably have known.

Defining what facts are material is admittedly difficult. In the Real Estate Manual published by the North Carolina Real Estate Commission, the authors write: “[A]ny definition  necessarily will be somewhat vague because the concept is intended to have broad application, thereby defying specific definition. This is complicated by the fact that a given fact may be considered “material” and require disclosure in one context, but not in another. In its broadest sense, a “material fact” may be said to be any fact that is important  or relevant to the issue at hand.”

When dealing with facts about the property itself, the Real Estate Manual states that any “significant property defect or abnormality” is a material fact. Examples given are a  structural defect, a malfunctioning system, a leaking roof, or a drainage or flooding problem.

Applying this guidance to the facts here, it is important to distinguish between what the listing agent was told and what the agent knew. If the buyer in this case merely  requested that the HVAC system be replaced without providing a report by a qualified inspector, the listing agent arguably does not know that the HVAC unit really requires  replacement. However, at a minimum, the request for this “repair” is a red flag and the listing agent should inquire further. If buyer number one did provide an inspection  report that noted a faulty HVAC unit, or if the agent confirms a problem with the HVAC unit, the agent would clearly have a duty to disclose that defect to subsequent buyers.  It does not matter that this fact was not known when the property was originally listed for sale, nor does it matter that a previous buyer (or their inspector) was the source of  the listing agent’s knowledge.

In contrast, just because the listing agent has learned that some door stops may need adjusting does not transform that exceedingly minor “defect” into a material fact. That is not something that needs to be investigated further or disclosed to subsequent buyers. Other examples of non-material defects include a dripping faucet, and cosmetic items  like scratches on a hardwood floor and cracked ceramic tiles.

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Winston Salem Real Estate Sales Statistics

Winston Salem - Forsyth County Statistics YTD

My assessment is:

Days on the Market is Strong

Average Sales Price is up 4.2 percent

Please reach out to me if you have questions about your situation or new Commissions Rules .

When you are ready to sell: Let me show you how I get it done and significantly save you on your cost to sell