NCRECCASESTUDY#1: How Would You Respond?

Source Credits: North Carolina Real Estate Commission (NCREC)

SUBJECT TOPIC: Material Facts (July 2024)

ISSUE: Did the listing broker comply with N.C.G.S. §93A-6(a)(1)? 

FACTS: A broker listed a seller’s family home for sale. The broker informed the seller about the purpose and requirements of the Residential Property and Owners’ Association Disclosure Statement (RPOADS). Having not lived in the home for several years, the seller had limited knowledge about the property’s condition. The broker clarified that the seller could choose to make no representations regarding the home’s condition without misrepresenting it.  

The seller felt overwhelmed by the information requested and decided to make no representations.  The listing agent further explained the broker’s duty to disclose any material facts and/or defects and pointed out a few issues the broker noticed during the walk-through. The RPOADS remained unchanged, but the broker did list the discussed defects in the property description.  The broker did note several areas of pooling water in the backyard but failed to do any further investigation and made no disclosures. 

The property sold quickly in a cash transaction. Several months later, the home flooded during tropical storms. Following the flooding, the new owner learned that the property was located in a federal flood plain.  The previous owner did not carry flood insurance and had marked “No Representation” for questions about flooding on the RPOADS. Since the buyer did not use a lender, flood insurance wasn’t required.