With the real estate market fluctuating as it has been the past several years, there is a lot of inventory for sale. Some sounds like a bargain, but is it really?
With properties that have been on the market awhile or if the seller is in a hurry to sell, they may feel the need to embellish, misrepresent or, quite frankly, lie about their property to make a sale. These tactics employed by desperate sellers are unethical, and the law will protect you, right?
A review of North Carolina case law shows that the answer may surprise you.
1. Let the Buyer Beware – do your homework
North Carolina courts have clearly recognized the policy of caveat emptor or "let the buyer beware" when it comes to real property in North Carolina. The cases have ranged from structural integrity and the right to use an access easement to acreage and square footage.
Each of the cases boiled down to was this question: Was the embellishment or misrepresentation able to be revealed if the buyer had exercised reasonable diligence in searching out potential defects in the real property?
This means that buyers have a duty to use all means at their disposal to discover defects by ordering a building inspection, wood-destroying report, survey and hiring an attorney for legal advice and title search.
2. As Is, Was, and Shall Be… YOUR responsibility
Another area where buyers need to beware is with properties sold As Is. Foreclosures have left banks with many properties to sell. The huge amount of inventory banks have on their books makes the condition or issues with their properties difficult to ascertain. As a result, banks shift this risk to the buyer by selling the property As Is.
North Carolina courts have made it very clear that if a property is sold As Is, then the buyer assumes all risks, regardless of how expensive or damaging the defect may be. This is the right time to find a building contractor or home repair company to provide you with reasonable estimates so you can determine if the repairs are within your budget. You need to make sure your lending sources are lined up as well should the home need repairs in order to make it habitable.
If you are a buyer thinking of purchasing a bank-owned property, be sure to include a due diligence period in the contract. With a due diligence period in the contract, a buyer will be able to make his inspections, and if need be, withdraw the offer should any issues be revealed by the inspections.
3. Responsibility of the Seller’s Agent
For real estate agents, the courts have imposed a special duty to disclose material facts and not make fraudulent misrepresentations to buyers, even though the agent is representing the seller. A material fact relevant in the current atmosphere is if the seller is in foreclosure. There is no duty for the agent to disclose this information if the seller is only behind on payments. However, once the seller has a foreclosure filed against him or her, it becomes a material fact that the seller’s agent must disclose as soon as he or she has knowledge of the foreclosure.
4. Closing with a Settlement Company
A recent trend has seen settlement companies seeking to handle closings. However, a settlement company is limited to collecting and disbursing the buyer’s money and pointing at the loan documents, and telling the buyer where to sign. Anything beyond that is illegal for the settlement company. With a settlement company, the buyer cannot receive legal advice or legal judgments to protect his or her interest.
5. Get the Advice of an Attorney
The best advice an attorney can give you is hire an attorney to handle the closing. An attorney can discuss the legal implications of any defect found, verify that there are no issues with ownership of the property and protect the buyer’s interest in connection with the purchase. [Read our article: The Difference Between Plot Plans and Surveys.] The attorney can also explain and answer questions regarding the buyer’s loan documents.
In a nutshell, when you are making a purchase as large as real property, it’s important to not cut corners to get a good deal. Buying a home is one of the biggest purchases you’ll make. Take the time needed to get the proper surveys, inspections, reports, and consult with a legal professional about your investment. You’ll be glad in the long run that you did.
Published by J. Chris Huff on November 2, 2015