Material Facts

We all know what a material fact is, right? It’s drilled into brokers in pre-licensing and all three post-licensing classes. Then why do almost half of the disciplinary cases coming before the Commission involve material facts?  

Let’s review- a material fact is any fact that could affect a reasonable person’s decision to buy, sell, or lease real property. The four categories of material facts are: facts about the property itself; facts that relate directly to the property; facts directly affecting the principal’s ability to complete the transaction; and facts that are known to be of special importance to a party. 

Some facts are ALWAYS material and must be disclosed because a reasonable person will always want to know that fact. For example, whether a property is in a flood zone, whether a property is located in a neighborhood with restrictive covenants, whether there is a homeowner’s association, or whether the property’s electrical system has an obvious malfunction, will always be material facts that a broker has a duty to make reasonable efforts to discover, and then disclose.   

Some facts about a property will only become material based on the specific wishes, wants, or needs of the party. For example, if a buyer has small children who go to bed early, the buyer may tell their buyer agent they do not want to buy a home in an area where there is going to be a lot of noise or traffic at night – like close to the neighborhood bar featuring live outdoor music. In this situation, because the buyer expressed a need for quiet, the buyer’s agent should ask questions and investigate the area around the prospective property to make sure that it fits their client’s specific needs.   

What should a broker do if they discover something that should be disclosed after they list a property? Recently a broker found out the hard way that you MUST immediately disclose a material fact once you learn of it, even if your seller is going to try to fix it. 

Here are the facts- A seller went under contract with a buyer who had a radon test done in the home. The test results were way over the EPA’s “safe” limit on radon (4.0 pCi/L) and the first buyer terminated the contract during the due diligence period. The broker advised his client to install a radon mitigation system, which they agreed to do, but did NOT install the system prior to other potential buyers viewing the property and they did not disclose the high radon reading to other prospective buyers.   

Remember that sellers have a different duty than brokers regarding material facts. You will note that when you read the Residential Property and Owners’ Association Disclosure Statement (RPOADS), it states that: “If something happens to make the Disclosure Statement incorrect or inaccurate (for example, the roof begins to leak), the owner must promptly give the buyer an updated Disclosure Statement or correct the problem.”  

However, licensed brokers must always disclose material facts about the property, even if the seller updates the RPOADS or plans to correct the problem. When this broker learned of the high radon reading, the broker had a duty to disclose the reading. He could not rely on the fact that his sellers were planning to lower the radon levels by installing a radon mitigation system at some point. This was an intentional omission of a material fact, and the broker was disciplined by the Commission after a hearing.  

The radon mitigation system, once in place, remains material in that it is an entirely new system in the property that requires ongoing monitoring and maintenance to assure that a safety hazard otherwise impacting the property stays properly under control. The existence of such a system may impact the decision-making of a reasonably prudent buyer. 

Let’s talk what is NOT going to get you in trouble with the Real Estate Commission- DISCLOSURE.  If it’s a material fact, DISCLOSE IT, and do it early, often, and ideally, in writing. (While a writing is not required, it’s recommended for your protection.) If you have a question about whether it’s a material fact, disclose it early, often, and in writing. 

New Commission Member: James Beaty, Jr.

James Arthur Beaty Jr. was recently appointed to the Commission by Governor Josh Stein. He is a former Judge of the United States District Court for the Middle District of North Carolina and a former nominee to the United States Court of Appeals for the Fourth Circuit.

Beaty grew up in Thomasville, North Carolina. He received a Bachelor of Arts degree from Western Carolina University in 1971 with Honors and a Juris Doctor from the University of North Carolina School of Law in 1974. He entered private practice in Winston-Salem, North Carolina in 1974, and in 1981 he became a judge of the Superior Court of Forsyth County, North Carolina, a position he held until 1994.

On August 25, 1994, President Bill Clinton nominated Beaty to fill a vacancy on the United States District Court for the Middle District of North Carolina created by the retirement of Judge Richard C. Erwin. The United States Senate unanimously confirmed Beaty in a voice vote on October 7, 1994. Beaty became chief judge of that court in 2006. He is based in Winston-Salem. He assumed senior status on June 30, 2014, and retired from active service on January 31, 2018.

Current Stats: Monthly Licensee Count as of March 1, 2025

Current Stats: Monthly Licensee Count as of February 1, 2025

Commission Presentations

Janet Thoren, Director of Regulatory Affairs, spoke at Canopy REALTOR® Association on February 6^th.

Bryan Boyd, Deputy Legal Counsel, Beau Minnick, Consumer Protection Officer, and Bruce Rinne, Information Officer, spoke at Allen Tate Glenwood on February 11^th.

Brian Heath, Consumer Protection Officer, and Jean Hobbs, Auditor/Investigator, spoke at the North Carolina Property Management Conference on February 26^th and February 27^th.

March 2025 Presentations

*These presentations are subject to change due to the availability of Commission members and/or staff.*

Lyndi James, Auditor, will speak at Onecom Properties LLC on March 3^rd.

Christy Evans, Consumer Protection Officer, will speak at Coldwell Banker HPW on March 4^th.

Miriam Baer, Executive Director, will speak at Durham Regional Association of REALTORS® on March 4^th.

Jean Hobbs, Auditor/Investigator, will speak at PROACTIVE Real Estate on March 13^th.

Kristen Fetter, Assistant Director of Regulatory Affairs, will speak at United Real Estate – Queen City on March 13^th.

Bruce Rinne, Information Officer, will speak at Lake Norman Realty on March 19^th.

Bruce Rinne, Information Officer, will speak at Home Towne Realty on March 27^th.

Diversity, Equity, and Inclusion Article: Fair Housing Symposium

The North Carolina Real Estate Commission, in collaboration with other state and federal agencies, is hosting a Fair Housing Symposium.  

As real estate professionals you must stay informed and up to date with the laws that govern your professional duties and obligations. The Fair Housing Act of 1968 is one of the most important pieces of housing regulation in United States history., Although this law is approaching its 57^th anniversary it is constantly evolving with the times. If you are a real estate broker you do not want to miss this opportunity to hear directly from fair housing experts about the emerging fair housing trends, comprehensively explore fair housing laws, and learn more about best practices as a practitioner. Real estate brokers will earn 4 hours of CE credit.   Registration is limited to the first 75 registrants, so register here today.

Case Study: Expired License

FACTS:  A non-provisional broker completed the General Update Course and an approved CE elective prior to June 10, 2024. However, the broker failed to renew their real estate license by June 30, 2024.

On July 7, 2024, the non-provisional broker continued to work all their pending transactions, including a residential transaction that was scheduled for settlement on July 15, 2024.  

ISSUE: Is it permissible for the non-provisional broker to complete their pending transaction if they did not renew their real estate license?

ANALYSIS:  No. A broker who fails to renew their license by June 30 is not permitted to engage in any brokerage activities beginning July 1. In this scenario, the broker timely completed 8-hours of CE pursuant to Rule 58A .1702 based upon their license status. However, they did not renew their license between May 15-June 30^th. A non-provisional broker has an active real estate license when they timely complete the appropriate CE pursuant to their license status by June 10^th and renew their real estate license between May 15-June 30^th of each license year.

Therefore, the non-provisional broker in this scenario is not permitted to engage in any brokerage activities, including attending the closing for the buyer client’s transaction on July 15, 2024. While a broker whose license expires can be paid for work performed while their license was active, they cannot continue providing brokerage services once it expires. EWven if the transaction was pending before the non-provisional broker’s license expired, the BIC of the brokerage would need to send another affiliated broker to represent the company’s client for the closing on July 15, 2024.

Moreover, the non-provisional broker is not permitted to resume brokerage activities until their license is reinstated back on active status and affiliated with a BIC.  Additionally, a BIC is responsible for supervising all affiliated brokers at the office and ensuring they have complied with requirements for renewing their license and maintaining an active license. A broker cannot engage in brokerage activities with an expired license.

RESOURCES: N.C.G.S. § 93A-6(a)(10) and N.C.G.S. § 93A-6(a)(15)                        

License Law and Commission Rules: 58A .0503 and .0504

Articles: “Can I Get Paid” and “My license has expired! How do I reinstate it?”      

QUICK TIPS FROM THE EDUCATION AND LICENSING DIVISION

“Renewal is coming!  Please login to your account and make sure we have a valid email address for you.” 

-Brenda H, License Services Officer

“The 12-hour Broker-in-Charge Course is NOT an Update Course.”

-April C, Logistics and Program Manager

“Check your License Record to ensure your CE is posted and up to date.”                                             –

-Deb C, Education and Examination Officer

“The Commission’s 12-hour BIC Course does NOT make you a BIC.”

-Anonymous

“Postlicensing does NOT count towards your CE requirement.”

– Andrew C, Education Officer

Sellers’ Obligation to Disclose Latent Defects: Legal Liability and the Role of Brokers

In May 2024, the North Carolina Residential Property Owners’ Association Disclosure Statement (RPOADS) was revised to include the following statement under the General Instructions on Page 1:

This statement emphasizes and clarifies the sellers’ long-standing responsibility to disclose latent (hidden) defects in real estate transactions when the seller is aware of the defect, and it is not reasonably discoverable by the buyer. The statement also highlights the potential consequences sellers face if they fail to disclose known material defects. While the revision clarifies disclosure requirements, it does not introduce new legal obligations. North Carolina law has long held that sellers may be liable if they knowingly withhold or misrepresent material latent defects. However, to be held liable, it must be proven that the:

• seller had actual knowledge of the latent defect, and
• seller intentionally misrepresented or failed to disclose the defect.

The following two court cases are significant in reinforcing that sellers may be civilly liable for the nondisclosure of known material defects that a diligent buyer was unable to discover:

• Everts vs. Parkinson (NC Court of Appeals, 2001); and
• Cummings v. Carroll (NC Supreme Court, 2021).

The Role of Brokers: Open and Honest Communication

Because latent defects are hidden, brokers may not have firsthand knowledge of them. This makes open and honest communication between brokers and sellers essential. Sellers must be forthcoming about any known but hidden issues, as brokers rely on the seller’s disclosures to provide accurate information to buyers. If a seller intentionally withholds a known hidden defect, they risk liability, which could have serious legal and financial consequences.

Brokers, in turn, should help sellers understand the potential risks of failing to disclose hidden defects. This includes educating sellers about how nondisclosure could lead to legal action. As always, brokers should direct sellers to the seller’s attorney for specific legal advice.

Conclusion The revision to the General Instructions on the RPOADS serves as a critical reminder that sellers in North Carolina can be held liable for failing to disclose latent defects. If a seller knowingly hides a defect, they may face legal consequences. Given the hidden nature of these defects, brokers should facilitate transparent discussions with sellers to help ensure compliance with disclosure requirements. This protects not only buyers but also sellers from potential legal claims, reinforcing trust and integrity in real estate transactions.

Reminder: Complete Your CE by June 10 and Only NC-Approved CE Counts!

The deadline to complete your Continuing Education (CE) for this license year is fast approaching! All North Carolina real estate brokers who have previously renewed their license must complete their required CE by June 10 and renew their license by June 30 to maintain an active license.

To meet this requirement, you must complete the General Update (GENUP) or Broker-in-Charge Update (BICUP), depending on your license status, and an approved NC real estate elective course.

Only Approved Courses Count!

Only CE courses approved by the North Carolina Real Estate Commission (NCREC) will count toward your license renewal. CE taken for other professional licenses (such as appraisal, general contracting, etc.) does not satisfy your NC real estate CE requirements unless the course is also approved by the NCREC. Additionally, CE completed for a real estate license in another state will not count unless it has also been specifically approved as North Carolina real estate CE. You can search for approved courses on our website.

To Search for In-Person and Synchronous (Live-Online) CE Courses:

1. Visit www.ncrec.gov.
2. Click on the Education menu.
3. Select Search CE Course Schedules.
4. Click on Search Providers to see a full list of scheduled courses.

You can refine your search by provider, instructor, or city. Contact the education provider directly to register.

To Search for Distance (Self-Paced Online) CE Elective Courses:

1. Visit www.ncrec.gov.
2. Click on the Education menu.
3. Select List of Distance CE Providers.

This will display a list of providers offering self-paced online elective courses. Contact the provider directly to register.

Act Now!

Please do not wait until the last minute! Go ahead and take care of your education requirements now, so you are not scrambling to find an open class or get delayed by some unexpected life event and miss the deadline. More importantly, it is better to arm yourself as soon as possible with the education and knowledge you need to better serve your clients now and in the future.

For more information, visit the Commission’s website at www.ncrec.gov.