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

 

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

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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.

© Copyright 2014 - 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 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

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