THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Saturday, July 15, 1995 TAG: 9507130302
SECTION: REAL ESTATE WEEKLY PAGE: 28 EDITION: FINAL
COLUMN: ABOUT THE OUTER BANKS
SOURCE: Chris Kidder
LENGTH: Medium: 99 lines
America's founding fathers divorced themselves from English royalty and the state religion. But they kept the basic tenets of English common law, an often cumbersome system based on custom and legal precedent, developed during the Middle Ages.
When you consider that the Middle Ages - called the Dark Ages in some circles - officially ended around 1500, there's little wonder that we might think some of our legal practices need fine-tuning.
One of common law's dearly cherished principles has been ``caveat emptor.'' Buyer beware. It once rolled off the tongue with authority. It's spoken today only as a last resort, when the mountains of consumer protective legislation or the miles of regulatory red tape fail to provide satisfaction.
According to Black's Law Dictionary, the phrase ``summarizes the rule that a purchaser must examine, judge, and test for himself.'' That doesn't have much consumer appeal.
Although the heady days of consumerism have passed, we're still chipping away at situations where buyers and sellers are working at cross purposes. The real estate transaction is one of those situations.
Sellers, naturally, want to get the most money as quickly as possible for their property. They're understandably reluctant to bring up the air-conditioner that doesn't work or the roof that leaks. They're even less inclined to mention the swarm of killer bees that moved into the attic last summer or the superhighway slated to bisect the neighborhood in 2010.
But even when the seller won't tell, North Carolina real estate agents are required by law to ascertain and disclose material facts relating to a property to the buyer. Whether the agent works for the buyer or the seller, whether the agent actually knows or simply should know, makes no difference.
``North Carolina Real Estate,'' the state's text book for real estate agents written by Patrick Hetrick and Larry Outlaw, defines material facts as any facts of substance relating to a property that might affect a prospective buyer's decision to buy.
You can bet that unhappy buyers who uncover adverse material facts are not reluctant to point fingers at their real estate agents. A ``large percentage'' of the complaints received by his agency each year ``are allegations that material facts were misrepresented,'' says Tom Miller, legal counsel for the North Carolina Real Estate Commission.
Most of these complaints don't result in the commission taking disciplinary action, (of the 79 penalties meted out by the commission and reported in the last three issues of their quarterly ``Real Estate Bulletin,'' only five involved misrepresentation).
But this doesn't mean buyers can't pursue their allegations in court. They can - and do - file lawsuits charging real estate agents with violations of the state's Unfair or Deceptive Trade Practices Act. They demand hefty cash awards.
Just how frequently this happens and how often buyers convince the courts that real estate agents are the culprits is unclear. But there's no question that real estate agents feel threatened.
In response to this, the National Association of Realtors, through its state affiliates, has been pushing the adoption of property disclosure laws that put the monkey of honesty squarely on the seller's shoulders.
``If we lie, we pay,'' says John Myers, president of the Outer Banks Association of Realtors, who says the law is needed. ``If they (sellers) lie, they should pay.''
Twenty-five states have enacted property disclosure laws. The North Carolina legislature is considering such a bill for the second time in as many years. It has passed the House and is currently being studied by the Senate judiciary committee.
If passed, this law would require sellers to sign disclosure forms for property defects at the time properties are listed by real estate agents. Buyers would be required to read and sign the document before making a decision to buy.
NAR considers the law mandatory disclosure. Miller, more correctly, calls it voluntary. He explains that, while signing the form is mandatory, sellers have the option to list defects or say they're not disclosing anything.
``We're optimistic about this legislation in as much as it will encourage sellers to disclose certain information that might not have otherwise been disclosed,'' says Miller. ``We hope market conditions will favor properties where full disclosure has been made.''
Myers can't see too many sellers refusing to disclose defects once the law is enacted. Having disclosure may give the consumer a little more confidence, he says. Sellers who refuse to disclose ``put up red flags.''
But there's been little discussion about increased liability for sellers who chose to make ``voluntary'' disclosures. Expecting courts to hold them more accountable for undetected defects, sellers in states with disclosure laws have turned to professional home inspectors, giving buyers a new scapegoat when things at the new homestead break down.
The new law may give real estate agents some measure of protection from dishonest sellers and litigious buyers but consumers may gain less than might be expected.
All the legislation in the world can't create honesty, circumvent nature or undo human error. Caveat emptor - buyer beware - may be old law, but it may be the best there is. MEMO: Send comments and questions to Chris Kidder at P.O. Box 10, Nags Head,
N.C. 27959.
by CNB