What are an agent’s disclosure obligations after a transaction is terminated?

QUESTION:  One of my buyer clients hired a home inspector who discovered several material defects in the home she had agreed to purchase. I shared the inspection report with the listing agent and we requested that the seller either repair the defects or offer a monetary concession. The seller refused. The buyer terminated the contract and the home is now back on the market. I have noticed that the MLS listing still includes the original Residential Property Disclosure Statement and that the listing agent has not disclosed any of the defects in his public or agent remarks. Do I have a duty to disclose those defects to other potential buyers? If not, am I permitted to disclose them? Finally, if I can disclose them, should I?

ANSWER: In its License Law and Rules Comments, the Real Estate Commission states that an agent’s duty to disclose material facts extends to “both the agent’s principal and to third parties the agent deals with on the principal’s behalf.” That means that an agent’s obligation to disclose material facts is triggered by the existence of an agency relationship. If an agent has information about a property, but is not involved with that property on behalf of a client, there is no agency relationship and no statutory duty to disclose.

Even if a buyer agent has no duty to disclose facts about a property, the agent may wish to do so for various reasons. As long as the agent does not provide false or misleading information about the seller’s property, there is no law or rule prohibiting such disclosure. Having said that, a buyer agent should be careful about making disclosures about a property when their direct involvement with that property has ended. For example, unless an agent continues to visit the subject property, the agent would not know if the seller had repaired the defects discovered during their client’s due diligence period. That lack of knowledge could cause the agent to disclose inaccurate information about the seller’s property. If the agent’s disclosure of inaccurate information causes harm to the seller, civil liability and/or discipline could result.

Our suggestion for buyer agents faced with this situation is to consider submitting a request for assistance through NC REALTORS®’ Ombudsman Program. Among other things, the program is designed to resolve inter-REALTOR® conflicts. A description of the Ombudsman Program and an Ombudsman Request Form can be found on the NC REALTORS® website here.