Are there guidelines for where and when a material fact must be disclosed?
QUESTION: I have been asked to list a property. When I met with the seller, he informed me that he had already received a notice of hearing that was filed by his lender who was seeking to foreclose on the property. I know that once a notice of hearing has been filed, the foreclosure is a material fact that I have a duty to disclose. Are there guidelines for where I must make that disclosure and when?
ANSWER: In their course materials for the 2022-2023 General Update Course, the Real Estate Commission has provided guidelines on both of these subjects.
With regard to timing, the Commission’s update materials state that the disclosure of material facts must be “timely.” “Timely” disclosure means that prospective buyers are provided the information in plenty of time to make an informed choice as to whether to make an offer on listed property. The update materials also note that if the listing agent becomes aware of a material fact after a listed property goes under contract, that fact should be disclosed immediately to all parties to the transaction.
Real Estate Commission rule 58A.0109(d) discusses the timing of disclosure in another context: the disclosure of compensation. It states that such disclosure is timely “when it is made in sufficient time to aid a reasonable person’s decision-making.” It is clear that disclosures of material facts must be made before a prospective buyer decides to make an offer.
As for how or where the required disclosure should be made, the update materials note that there is no rule mandating where the required disclosure must take place. The Commission then suggests several possible options. One option is to make the disclosure in the multiple listing service. The Commission’s written guidance states that the disclosure can take place in the “remarks section” but does not specify which “remarks section.” Our recommendation is that you disclose material facts in the public remarks section. That ensures that your disclosure reaches the widest possible audience.
A second option deemed acceptable to the Commission is for brokers to make the required disclosure via email or text message. Agents exercising this option should be extremely cautious. Disclosures by email or text must still be timely. It is too late to make a disclosure via text or email once an offer has been received.
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