Winston Salem | What Does Selling 'As-Is' Really Mean?

Courtesy of:  Carolina Living Real Estate and

Stephen L. Fussell, Chief Consumer Protection Officer   NC Real Estate Commission

The term, “As Is,” means that a seller has decided in advance of soliciting offers that he or she will not make any repairs to the listed property.  Disclosing this decision to prospective buyers puts them on notice that the seller will not make any repairs regardless of the results of inspections. However, it should not discourage prospective buyers from ordering inspections as doing so is a prudent means for determining the true condition of a property. One misconception is that when a seller notes “As Is” on a property, the buyer has no right to inspect. The NC Realtors Standard Form Offer to Purchase and Contract (No. 2-T) specifically gives the buyer the right to conduct their due diligence and order relevant inspections.

There is no State law or Commission rule compelling sellers to make repairs. Moreover, Section 4(c) of the NC Realtors Contract 2-T reads in part, “Buyer acknowledges and understands that unless the parties agree otherwise, THE PROPERTY IS BEING SOLD IN ITS CURRENT CONDITION.” With that said, many sellers are willing to make at least some repairs as a means of facilitating a sale.  If every seller refused to make repairs, then many transactions would fail to close for that reason. NC Realtors created the Due Diligence Request and Agreement (“DDRA”) form (No. 310-T) for buyers and sellers to identify the repairs they agree upon.  Once all parties sign this form, the seller then has an obligation to make the repairs listed on the form.

Another common misconception is that selling a property “As Is” gives a seller and/or a listing agent the opportunity to conceal material facts about the property. While a seller can always answer “No Representation” to any question on the Residential Property and Owners’ Association Disclosure Statement (“RPOADS”), a seller who answers “No” to a question when the truthful answer is “Yes,” may face civil liability for his/her misrepresentation.

Real estate brokers, including those brokers who are selling their own properties, must always disclose material facts. A listing agent has the duty to discover and disclose material facts. The Commission holds brokers responsible for the information they know or reasonably should know about or relating to a property. Therefore, even if a seller fails to disclose a material defect on an RPOADS, the listing agent must disclose it to prospective buyers or their agents prior to the formation of sales contracts.  If a seller indicates he/she does not want a listing agent to disclose a material fact, then the listing agent should decline to list the seller’s property.

COMPETING OFFERS - You Might Be Surprised.

Winston Salem | Who gives permission to share or not share an offer to other interested parties?   

My broker stated that the listing agent disclosed my offer to other parties, so they offered more than me for the property. I think the seller didn’t accept my offer because of their listing agent

Commission Rule 58A .0115 prohibits brokers from sharing the price or other material terms with competing parties without the express authority of the offering party (usually the buyer). Express authority is an agent’s power to act on behalf of their principal. In other words, the client gives the broker permission to perform some act. However, brokers should know that License Law and Commission rules strictly prohibits the “shopping” of offers without everyone’s permission to do so. A listing agent should not reveal to anyone other than the seller-client that a ‘full-price’ or ‘cash’ offer has been submitted, because sharing such information with a competing buyer would be a violation of Rule A .0115

For clarification, a seller has the right to consider and respond to one offer or all offers. However, if the seller finds the offers received unacceptable, the seller may request the listing agent to ask prospective buyers to submit their highest and best offers. The seller makes this decision, not the listing agent. If the seller calls for highest and best offers, the listing agent should advise buyers to submit a new offer or stand by their original offer. However, under no circumstances should the listing agent share the offer amount of any offeror without their express authority. Additionally, the listing agent cannot redact the offering price within an offer and share this information without express authority to competing buyers, because “other material terms” are still being shared. In October of 2017, the Commission published the article, “Be Prompt, Fair, and Honest When Dealing with Multiple Offers.” This article focuses on ensuring that brokers present all offers immediately to the seller; however, the seller determines which offers to consider.

For fair and knowledgeable representation, contact me for a no obligation consultation.

Winston Salem | NAR Settlement Guidelines

The NAR settlement agreement also mandates two key changes to the way members and MLS participants do business.

1. NAR agreed to create a new MLS rule prohibiting offers of compensation on the MLS. This would mean that offers of compensation could not be communicated via an MLS, but they could continue to be an option consumers could pursue off-MLS through negotiation and consultation with real estate professionals.
2. NAR also agreed to create a new rule requiring MLS participants working with buyers to enter into written agreements with their buyers before the buyer tours a home. NAR has long encouraged its members to use written agreements to help consumers understand exactly what services and value they provide, and for how much.
   

Let's sit down and discuss the ins and outs on how I can assist you and navigate these new waters in Real Estate Transactions!  

Winston Salem QUESTION: Commissions – Can I share my commission with my client?

 

I have always been willing to negotiate my commissions with my clients.  With the new NAR ruling, this is even more important.  Below are the rules, I am bound by. (Note, this applies to our Property Management business as well)

ANSWER: Yes. The Real Estate Commission takes the position that brokers may rebate or pay a portion of their brokerage fees to buyers and sellers who purchase or list real estate through the broker, because a real estate license is not required of persons who list for sale real estate which they own or who purchase real estate for their own account. Agents should: (1) have the consent of the principal(s) (for example, if you are acting as a seller’s (sub)agent or dual agent and want to share your commission with the buyer, then obtain the seller’s consent in writing); (2) disclose the payment to the lender; and (3) assure that the payment appears on the settlement statement (failure to disclose the payment on the settlement statement could constitute a “false statement to a lender,” which is a federal crime and also a violation of the License Law and North Carolina Real Estate Commission rules).

Contact me and I can answer all your questions!

Disclosing Material Facts By Seller

 At Carolina Living Real Estate, we are always trying to educate our clients on various real estate subjects.  Below is a good one for property owners to understand.   As always, you can call us to discuss anything.  

 Below is an article posted on the Realtor website.

You must disclose even if can't be detected by usual means!   See WHY!

QUESTION: Offer to Purchase and Contract (Form 2-T) – The seller failed to disclose a defect related to the property. Can my client terminate and get their Due Diligence Fee back?

ANSWER: A seller ordinarily is not required to disclose facts about their property. However, a seller must disclose material facts when such facts are only known to the seller and not within the diligent attention, observation, and judgment of the buyer. In other words, if there is a material latent defect on the property only known to the seller, and the buyer cannot discover the defect through reasonable diligence, the seller has a mandatory duty to disclose.

If a buyer goes under contract, and it is later revealed that the seller failed to disclose a mandatory material fact or made a misrepresentation that the buyer reasonably relied upon, then the buyer could have several legal claims. The claims would vary case to case, but if successful, the buyer could be entitled to damages. Such damages could be the amount necessary to place the buyer back in the same position they would have been had the offer not been made in the first place. That amount would at least include the Due Diligence Fee. Some claims available to the buyer could award substantially more damages, plus an award of attorney’s fees.

When can I get a writ of possession after a tenant appeals the eviction order?

At Carolina Living Real Estate, we are always trying to educate our clients on various real estate subjects.  Below is a good one for property owners to understand.   As always, you can call us to discuss anything.  

 Below is an article posted on the Realtor website.

QUESTION: I run a property management company and we just won a summary ejectment case in front of our local magistrate. The tenant gave notice of appeal and I have received some information saying that I cannot get the tenant out until after the appeal is heard before a district court judge. How long will we have to wait and can’t I at least get some money for my client while we wait?

ANSWER: Congratulations on representing your landlord client successfully in court! The documents you received in the mail, following the tenant perfecting the appeal, were probably a copy of the order granting summary ejectment, the notice of appeal to district court, and the bond to stay execution on appeal of summary ejectment, which you can view here.

First, unlike the process in small claims court, an appeal to district court is a bit more formal. Generally, only attorneys or individuals appearing on their own behalf can appear in district court to argue the case. The district court will be more formal in receiving evidence by requiring the admission of documents and the formal examination of witnesses. Lastly, some counties do not automatically set the date for the appeal to be heard and an attorney or either the plaintiff or defendant will have to contact the trial court administrator and follow the local rules of court to request and set a date for hearing the appeal. While either party can request that the appeal be heard at the first session of court after the appeal is docketed, it can be quite some time before the court will have time to hear the matter.

In the meantime, if you read the fine print on the bond form you received, you will see that there are three requirements for a tenant to remain in possession pending the appeal. First, all defendants named in the summary ejectment action had to sign the bond and promise to pay rent to the clerk of court as it becomes due. Second, the defendants must pay the undisputed past-due rent to the clerk. Third, if there are more than five days left before the end of the rental period at the time the summary ejectment was ordered, the tenants will have to pay the prorated rent for the remainder of the month to the clerk.

Most importantly, the final paragraph on the bond form requires tenants to make payment of all future rents within the first five business days of each month. While the rent will be paid to the court, an attorney representing the landlord can make application for release of undisputed rents paid to the clerk pursuant to N.C.G.S. Section 42-34(e), found here. If the tenant fails to pay the rent by the end of the fifth business day each month, the landlord may request the clerk to issue the Writ of Possession Real Property form, linked here. If that writ is issued prior to the tenant making the monthly rental payment, the Sheriff can schedule the lockout. While the tenant will still have the right to argue the appeal, the issue of possession will no longer be pending, as the tenant failed to abide by the promises made under the bond.

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Winston Salem | Case Study about Material Facts When Selling Your Home

Note:   This also applies to those sellers that try to Sell the home themselves! 

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 will 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 doorstops 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.