In every real estate transaction whether it is residential or commercial, the broker must review the four available agency relationships with a prospective buyer or seller no later than first substantial contact. A broker can enter any of the four agency relationships, but before they do they are required by North Carolina Real Estate Commission to disclose it via the Working with Real Estate Agents Brochure. What is first substantial contact? The NC Real Estate Commission defines first substantial contact when conversation between a broker and a prospect shifts from facts about the property to discussing PTM which stands for Price, Terms and Motivation of the prospect and includes consumer’s needs, wishes, abilities or mere act as if fiduciary relationship was established. Agency disclosure should be made before a broker shows a property to a buyer as first substantial contact occurs no later than the time information is gathered to use in the selection of properties for viewing. If first substantial contact doesn’t occur face-to-face, then the Working with Real Estate Agents Brochure needs to be mailed, faxed, or emailed to prospective buyer or seller no later than three calendar days from the first substantial contact. The four available agency relationships in North Carolina are:
1. Seller’s Agent
If you are looking to sell your house you may be looking to list your property with a real estate agent aka broker that would work for you as a seller’s agent. You will be asked to sign an Exclusive Right to Sell Listing Agreement where you will allow a broker to represent you as your real estate agent for specified period of time. This is an employment contract between prospective seller and an agent broker. The agent and the listing firm representing you will have duties as part of this contractual agreement:
- Promote your best interests,
- be loyal to you,
- follow your lawful requests,
- use reasonable skill, care and diligence,
- account for all monies they handle, and
- keep all confidential information you have disclosed about you from prospective buyers or buyer’s agents.
The seller’s agent will offer to perform various services depending on the listing firm they work for. These may include:
- Helping you price the property,
- market your property through Multiple Listing Service,
- market your property through other social media outlets like Facebook and Twitter,
- provide you with all North Carolina required property disclosure forms for you to complete:
- Residential Property and Owners’ Association Disclosure Statement or RPOADS for single family and townhouses and Owners’ Association Disclosure and Condominium Addendum for resale of Condos. The RPOADS is required to be completed for residential property containing one to four units but excludes new construction, foreclosure sales and rent to own. It is required to be provided to the buyer no later than the time an offer is made on the property. However, the Residential Property Disclosure Act allows the owner to make no representation to the condition of the property and the owner has no duty to disclose defects even if the owner knows about them except as provided in the offer to purchase and sell agreement. If the buyer doesn’t receive the RPOADS by the required time of the offer to purchase, they have the right to cancel the contract.
- Mineral and Oil and Gas Rights Mandatory Disclosure has to be provided to buyers as of January 2015 no later than the time the buyer makes an offer. If they buyer doesn’t receive the disclosure as required they can cancel the contract within three calendar days of contract formation or three calendar days following receipt of the late disclosure. The disclosure statement must be completed and signed by the seller while the buyer needs to initial it to merely acknowledge its receipt. It is required in the following transactions involving a residential property of one to four units while ironically does not apply to sale of vacant land:
- Sales subject to Residential Property Disclosure Act which includes residential properties of up to four dwelling units
- New construction
- In a lease with option to purchase
- Sale where parties agree not to complete RPOADS.
2. Seller’s Agent working with a Buyer
This typically arises when a party is interested in a house listed by a seller agent without representation by a buyer’s agent. The seller’s agent can assist you with purchase of the listed property but at all times he/she represents the seller and their best interest in negotiation of the price and terms. The seller agent is still required to provide you with all material facts they are aware of like leaky roof, issues with plumbing, etc.
3. Buyer’s Agent
When you are looking to purchase a property, you have several choices in how you want to be represented in a real estate transaction. If you want the broker to represent you exclusively you would be looking for a buyer’s agent. The agreement with the broker can be initially oral but will need to reduced to writing via Exclusive Buyer Agency Agreement before the broker is legally allowed to draft an Offer to Purchase contract. Once the oral agreement is formed, your “buyer’s agent” is not allowed to provide any confidential information about you to the seller or the selling agent. The buying agent has the following duties to the buyer:
- Promote buyer’s best interests,
- be loyal to the buyer,
- follow buyer’s lawful requests,
- provide buyer with all material facts the agent learns about a real property under interest,
- use reasonable skill, care and diligence,
- and account of all handled monies.
The buying agent is typically compensated out of the seller’s commission specifically designated for the buyer’s agent. These vary depending on the property listed.
4. Dual Agent
When a buyer allows the real estate agent to represent them and the seller at the same time, a dual agency is formed. This typically happens when a buyer is interested in a property listed by buyer’s agent’s firm or listed by the buyer agent. Because it is difficult to advance the interests of both buyer and seller in the same transaction, many firms don’t allow dual agent representation unless it is a designated dual agency where a different agent of the same firm represents a buyer and a seller.