The License Law requires agents to refrain from misrepresenting material facts - either affirmatively or by willful or negligent omission. What is a material fact? Generally speaking, it is any information which the parties need to know in order to make an informed decision (i.e., which might affect the parties' decision to purchase or sell, or which has the potential to put the contract or interests of the parties at risk).
Material facts fall into three broad categories: facts about the property (leaky roof, synthetic stucco siding, presence of asbestos, etc.); facts relating to the property, including zoning changes and plans for a major highway nearby; and facts which relate to a principal's ability to complete the transaction, such as a bank foreclosure. Typical complaints of misrepresentation involve material facts that include hidden defects, changes in land use, whether a piece of land "percs," square footage and lot-size errors.
A recent complaint came from a condominium-buyer who discovered after closing that the condominium was smaller than she had been led to believe. In fact, the unit measured 200 square feet LESS than the figures in the listing agreement! The listing agent admitted to having used tax records to obtain the square footage.
To avoid this type of complaint, disciplinary action by the Commission and the potential for civil liability, do your homework! Don't rely on the work of others. Measure each piece of property yourself.
Be aware that your duty to properly disclose includes oral representations and representations made in print, so check your MLS listings and advertisements for accuracy. Also be aware of your duty to disclose material facts to all parties involved in the transaction, not just to the party you represent.
5. Disputes over Contract Acceptance
The Statute of Frauds requires that all contracts for the sale of land be in writing to be enforceable. Furthermore, all negotiated terms must be in writing, any changes must be initialed by the parties, and the contract must be signed by all parties.
A typical complaint occurs when agents negotiate for their clients orally; e.g., an oral counteroffer is relayed to the buyers and they agree to the new terms; their agent calls and informs the sellers' agent, who tells the sellers. The sellers think that they have a binding contract, but they don't. While the oral acceptance is an indication that a contract will soon be formed, it is not itself legally binding.
To avoid creating conflict between the parties and to ensure that your clients have an enforceable contract, don't tell them that they have a contract until you have the contract signed by all parties.
7. Conflict of Interest
The License Law prohibits agents in a transaction from acting for more than one party without the knowledge of all parties. Complaints in this area usually deal with dual agency, seller subagency, and special relationships between the parties.
With dual agency, there is an inherent conflict of interest because the agent is representing both the buyer and seller, who have different and competing interests. To avoid this type of complaint, you as a dual agent must be sure to disclose the duties that you owe to each party. Thoroughly review the agency forms and explain how your responsibilities as a dual agent differ from those in an exclusive agency arrangement. Finally, be sure to have the parties sign the Dual Agency Contract or Dual Agency Addendum, whichever is appropriate.
As a seller's subagent, keep in mind that although you are working with the buyer, your primary obligation is to the seller. Don't advise the buyer on strategy or advocate on his or her behalf.
Finally, if you have a special relationship with any party to the transaction (e.g., you are a relative of the buyer), disclose it to all parties to avoid the appearance of impropriety.
8. Discrimination
Recently the Commission received a complaint alleging discrimination at an open house. The matter ultimately was resolved, but not before an investigation by both the Real Estate Commission and the North Carolina Human Relations Commission.
The Fair Housing Act makes it unlawful to discriminate in the sale or rental of dwellings of four or more units on the basis of race, color, religion, sex, national origin, familial status (the presence of children under 18 years old) or handicapping conditions (including AIDS). Therefore, if you discover that the landlord, tenant, seller, or buyer that you represent intends to discriminate on the basis of any of these protected classes, you must immediately terminate your agency agreement with that party, or risk violating the law and losing your license to sell real estate in this state.
9. Records Violations
When the Commission receives a complaint, the first thing Commission staff requests is a copy of the firm's records, including bank statements, canceled checks referencing a ledger sheet, deposit tickets, separate ledgers, general journal or check stubs identifying each transaction, copies of contracts, leases, management agreements, closing statements, property management statements, and other relevant documents.
Commission rules require that agents retain records for three years; however, because complaints filed after the three-year limit for record retention are investigated, the Commission recommends that agents retain their records for longer than three years. Be aware that your documents indicating proper record-keeping can be used in your defense in the event that a complaint is filed against you.
10. Lack of Communication
Many complaints to the Commission come from disgruntled clients. Complainants state that their agents will not return their phone calls or keep them updated on their transactions.
Try to avoid this situation by communicating with your clients. Return their phone calls. Keep them informed about what you are doing for them and how the transaction is going. An informed client is less likely to complain to the Commission.
By Pamela V. Millward, Associate Legal Counsel
When buying or selling real estate and working with dual agency always educate yourself on the rules and ethical responsibilities of dual agency. Some real estate agents have been doing dual agency for a long time and are very good when it comes to using loopholes on listing properties, like the “Word” “Buy Owner” when it comes to square footage – like when public records square footage does not match owners square footage, energy efficient home, extra insulation, quality home, bonus rooms done without a permit. If you suspect something is wrong with your real estate transaction you should consult a trusted real estate Attorney.
