Bulletin Search
Case Study: Material Facts
FACTS: A broker listed a property for a seller and received several offers on the property in a short time frame.
The listing broker discussed the offers with the seller, and helped the seller evaluate the offers. After further negotiation, the seller accepted a buyer’s offer and the parties went under contract for the property.
The contract allowed for a due diligence period. During this period, the buyer had a home inspection performed. The inspection indicated that the home had some significant electrical and plumbing issues. The buyer agent shared these issues with the listing agent and tried to negotiate for the costs of repairs, but the parties could not come to an agreement. The buyer terminated the contract before the due diligence period ended and received their earnest money deposit back.
The listing agent re-listed the subject property making no changes to the listing. A potential buyer who was previously interested in the property wanted to submit an offer. The buyer asked the listing agent the reason why the property was relisted. The listing agent informed the buyer that the previous buyer had financing issues. The new potential buyer submitted an offer on the property.
ISSUE: Did the listing broker comply with N.C.G.S. §93A-6(a)(1)?
ANALYSIS: No. N.C.G.S. § 93A-6(a)(1) states that the Commission has the power to suspend or revoke at any time a license, or to reprimand any licensee, if following a hearing, the Commission adjudges the licensee to be guilty of making any willful or negligent misrepresentation or any willful or negligent omission of material fact.
A material fact is any fact that could affect a reasonable person’s decision to buy, sell, or lease real property. A broker has an affirmative duty to take reasonable steps to discover and disclose material facts to all parties in a transaction. Additionally, brokers are expected to take reasonable steps to discover all pertinent facts that are necessary to serve their clients’ interest. In this case study, the listing broker misrepresented the reason the previous buyer canceled their contract. The listing broker had actual knowledge of the plumbing and electrical issues.
The Commission also determines whether or not a broker knew of the existence of a material fact by analyzing documents and reviewing written correspondence. The Commission uses the Reasonableness Standard to evaluate a broker’s duty to discover and disclose material facts. This standard dictates that a broker has a duty to discover and disclose any particular material fact if a reasonably knowledgeable and prudent broker would have discovered the fact during the course of the transaction and while acquiring information about the property.
In this scenario, the listing broker misrepresented the reason the previous buyer terminated their contract. The listing broker did not act like a reasonably prudent broker because theyfailed to disclose the true reason for the terminated contract. Additionally, the listing broker had knowledge of the electrical and plumbing issues and had a duty to disclose those material facts to additional parties. After the prospective buyer terminated the contract, the listing agent failed to revise the property description prior to re-listing the property and misrepresented known material facts.
The listing broker had a duty to disclose the issues with the plumbing and electrical systems in the house. The listing broker’s assertion that the terminated contract resulted from financing issues is incorrect. Every broker must exercise reasonable care and diligence in discovering and disclosing all material facts to all interested parties in a timely manner in adherence to N.C.G.S. § 93A-6(a)(1).
As a result of this misrepresentation and the listing broker’s failure to adhere to N.C.G.S. § 93A-6(a)(1), the listing broker may be subject to disciplinary action by the Commission.
RESOURCES:
N.C.G.S. § 93A-6(a)(1), 93A-6(a)(8), and 93A-6(a)(10)
License Law and Commission Rules: Rule 58A .0110
Articles: 2022-2023 General Update Course
Tech Corner: Two-Factor Authentication
How often do you check your email, social media, or financial accounts each day? Did you know that your accounts are more vulnerable to cyber-attacks if you have not enabled two-factor authentication?
The Federal Trade Commission (FTC) indicates that consumers should use two-factor authentication to protect all of their accounts, personal, business, and financial.
Employing Two-factor Authentication
Relying solely on passwords to access accounts is similar to having only one lock on a door securing a home. A door secured with a lock and a deadbolt is similar to two-factor authentication, which provides enhanced protection to individuals. Basically, if an individual implements two-factor authentication on their accounts, even if a hacker has access to their username and password, they will not be able to retrieve any information without the second authentication factor.
Common Authentication Methods Several platforms have adopted two-factor authentication and have allowed users to select their preferred method of verification. Some of the most common methods are:
- One-time passcodes,
- This method entails receiving a verification passcode via text message or email. The code typically consists of six digits, is valid for a single log-in attempt, and automatically expires.
- Authenticator application, and
- An authenticator app offers the possibility of receiving push notifications on your phone or tablet whenever there’s an attempted login to your account. These notifications typically provide details about the login attempt, such as the account being accessed, the geographical location of the attempt, the device type used, and the date and time of the login attempt. You can then approve or deny the request with a simple tap. There are several variations of authenticator apps like Google Authenticator, Microsoft Authenticator, and Duo.
- Security key.
- Security keys are physical devices serving as your secondary authentication factor, available in various forms and sizes. Security keys validate their association with your account. Some security keys plug into a USB port, while others utilize near-field communication (NFC) to establish connection when held close to your device.
The FTC recommends that individuals take a couple of minutes to set-up two-factor authentication on their accounts to prevent spending countless hours on trying to recover lost data or deal with identity theft.
Do you want to know more about keeping your personal information and identity safe? Sign up for Consumer Alerts from the FTC here.
Staff Appearances
Bruce Rinne, Information Officer, spoke at the NC REALTORS® Compliance meeting on March 5.
Bruce Rinne, Information Officer, spoke at the NC REALTORS® Commercial Alliance meeting on March 13.
Leslie Schwartz, Information Officer, spoke at Keller Williams Legacy on March 12.
Brian Heath, Consumer Protection Officer, spoke at Coldwell Banker HPW on March 14.
Charlie Moody, Deputy Legal Counsel, spoke at Premier Sotheby’s International Realty on March 12.
Brian Heath, Consumer Protection Officer, spoke at Coldwell Banker HPW on March 19.
Brian Heath, Consumer Protection Officer, spoke at the Triangle Chapter of NARPM on March 21.