New law went into effect January 1, 1996.
Under the North Carolina Residential Property Disclosure Act, most residential sellers are required to provide prospective buyers with a "Residential Property Disclosure Statement" prior to receiving offers from them. The new law seems to have been generally well-accepted by both buyers and sellers as well as by real estate agents. Nevertheless, many agents are still somewhat confused about the disclosure law and their duties under it.
Basic Provisions
The law applies to most transfers of residential one-to-four-unit dwellings by sale, exchange, installment land sales contract or option. It also applies to transfers by a lease with an option to purchase, unless the lessee occupies or intends to occupy the dwelling. The law applies whether or not there is a real estate broker or salesman assisting with the transaction.
If an agent is uncertain of the law's applicability in any particular case, the agent should research the matter before adwsing the seller.
There is a long list of specific exemptions, most of which address transfers where real estate licensees are usually not involved. The most significant exemption, however, will be frequently encountered by real estate agents: no disclosure statement is required for transfers involving the first sale of a dwelling that has never been inhabited, which includes most "new home sales."
The law requires sellers to provide prospective buyers with the disclosure statement and to indicate for each item addressed on the form either "Yes" (along with a description of the problem), "None Known," or "No Representations." If the completed statement is not provided to a prospective buyer until after the buyer makes an offer, the buyer has the right to withdraw the offer or terminate any resulting sales contract within three days after receiving the statement. In order to avoid giving a buyer a three-day right of rescission, sellers and their agents need to ensure that a completed disclosure statement is delivered to the buyer before the buyer submits an offer.
Basic Duty of Listing Agent
The disclosure law specifically imposes on a real estate licensee acting as agent of the owner (i.e., a listing agent) the duty to inforn the owner of the owner's rights and obligations under the law. To fulfill this duty, the listing agent should advise the seller at the time of listing whether or not the disclosure law applies to the particular transaction. This means that agents need to have a good understanding of when the law applies. If an agent is uncertain of the law's applicability in any particular case, the agent should research the matter before advising the seller. If the law applies, the agent should also advise the seller of the seller's statutory duties and the consequences of noncompliance. Note that the best way for an agent to fulfill this duty is to use the "Guidelines" that appear on the back of the required disclosure statement form that is provided by the Commission.
Additional Agent Duties
Under the Real Estate License Law, licensees have the duty to comply with and promote compliance with laws governing real estate transactions. Thus, licensees not only have the specific duties listed in the Residential Property Disclosure Act, they have the following additional duties.
A listing agent should:
(1) Provide the seller with a copy of the required "Residential Property Disclosure Statement" form provided by the Commission.
(2) Explain to the seller at the time of listing that, under the License Law, an agent must disclose to prospective buyers any material fact regarding a listed property which the agent knows or reasonably should know, even if the seller chooses not to disclose the fact or to make no representation about it. (All sellers should be provided this explanation, even if the disclosure law does not apply.)
(3) Assist the seller in assessing the property. This will include making a detailed property inspection, identifying and discussing with the seller items of possible concern, and reviewing the options for addressing such items.
(4) Assist the seller with proper completion of the form. Care must be taken to ensure that the completed statement is clear and easy for the reader to understand - especially where a problem is being disclosed for only one item (e.g., a defective air conditioner) in a multi-item category ("plumbing, electrical, heating or cooling systems"). Probably the best option is to check "Yes" and describe the problem, then write in either "Otherwise none known" or "Otherwise no representations" in the space provided. Each of the six categories of items on the form must be separately addressed, and the seller must sign and date the form.
(5) Assist in delivering the completed disclosure form to prospective buyers (usually through agents working with buyers). It should be a routine practice to immediately provide the completed form (via fax or otherwise) to agents calling for an appointment to show a property.
(6) Monitor the property and circumstances to help the seller ensure the continuing accuracy of the disclosure statement.
(7) Be sure the buyer signs the disclosure statement. Keep a copy and return a copy to the seller.
A seller's subagent working with a buyer should:
(1) Obtain a completed disclosure form from the seller or listing agent and assist in delivering the form to prospective buyers prior to the preparation of any offer.
(2) Be sure the buyer signs the disclosure statement. Keep a copy and return a copy to the seller or listing agent.
A buyer's agent should:
(1) Take affirmative steps, if necessary, to obtain a completed disclosure statement and deliver it to the buyer prior to the preparation of any offer.
(2) Be sure the buyer signs the disclosure statement. Keep a copy and return a copy to the seller or listing agent.
(3) Assist the buyer in assessing the disclosure statement and the property, identifying items of concern and advising the buyer to have inspections by experts where appropriate.
Conclusion
In order to properly support the Residential Property Disclosure Act, licensees need to have a thorough understanding of the law. To help ensure this, the 1996-97 mandatory Real Estate Update continuing education course indudes detailed coverage of this law and its implementation, as well as other important and interesting topics. The Commission suggests you take this course at your earliest convenience.
