The requirements and responsibilities are fairly simple:
1. Sellers, don’t fib.
2. Buyers, do your due diligence. Investigate and confirm the Seller’s disclosure, as well as other issues.

New construction home sellers, foreclosure home sellers, lease/option home sellers, and a few other excepted transaction sellers are not required to use the disclosure form.

The NC Residential Property Disclosure Statement in 60 Seconds.
Well, YouTube Video Editor is broken, and 60 Seconds just became 68 Seconds in Real Estate…. Whoops…

Category: People & Blogs
Uploaded by: MikeJaquish
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I enjoy taking clients to various mature neighborhoods like Scottish Hills, Farmington Woods, and MacGregor Downs in Cary., and many older Raleigh neighborhoods.

One thing that conveys with mature trees and landscaping is a property with a past. That past may be innocous, but may include items like lead-based paint and asbestos. These are generally recognized issues.

A very serious issue, and one of which few people are aware, is the possible existence of Underground Storage Tanks, “UST’s.” Prior to the introduction of natural gas and heat pumps in Wake County, many homes were heated with fuel oil furnaces. Fuel oil is delivered by tank trucks, and loaded into storage tanks. At some unfortunate point, someone determined that property would look better if the tanks were buried. Et Voila! The UST was born!

Filler pipe and breather tube for a UST, Underground Storage Tank. The existence of these pipes may be the first clue that there may be an issue with the property.

Later we learned that rust can perforate the UST, allowing fuel oil (or diesel fuel, or gasoline) to leak into the soil. This can have massive environmental repercussions, and homeowners can incur great costs in remediation.

Is the existence of a UST on the property a deal-breaker? Often it should be, as the mess can convey to the new owner. Clean-up costs can be huge. I have heard numbers from $10,000 to $45,000 to remediate the oil spill. And the legacy of the spill can have a very long tail. There is a North Carolina fund to help homeowners, but picking through the process can be daunting, and it is not entirely a free service.

I had clients fall in love with a sweet, older lakefront property last fall. The property was in the middle stages of an underground oil spill remediation. The oil plume underground was larger than the footprint of the house and garage. Monitoring wells are in place in 6 locations around the house to check the level of petroleum compounds in the groundwater. Huge vacuum pump trucks were brought in to pump the groundwater out of the area, and over 100 tons of soil was removed to specialized landfills. The cost had to be massive. The inconvenience had to be larger yet. Those wells will be monitored for years to come, and the neighbors potable water wells will also require monitoring.

My clients were sad to decide there was too much baggage attached for them to proceed.

Must a North Carolina Seller disclose the existence of the UST? At this time disclosure is not mandatory. The Seller can mark “No Representation” on the NC Property Disclosure form. That is legitimate disclosure, as long as no false representation is made.

However, the Agents involved, both Listing Agent and Buyers’ Agent are held to a higher standard. The competent, ethical Agent or Realtor MUST make some disclosure of the existence, and should be expected to see readily visible pipes like these.

The Listing Agent in the example failed transaction above handled the disclosure very well, was up front in the listing and in conversation, and delivered all information as rapidly as she could. And it was a learning process for both of us.

My clients and I sure loved the lake view, but in that case the UST was a deal-breaker.

This consumer-oriented rule was put into place to protect the client, to allow the client to be informed regarding their agent’s level of compensation in real estate transactions in North Carolina.
This rule was made due to the possibility of agents neglecting their fiduciary duty to their clients, by steering clients to homes where Sellers or Listing Agents are offering the most money to Buyers’ Agents.

This new rule pertains mostly to Buyers’ Agents, but can also pertain to Listing Agents in some circumstances.

When a North Carolina agent is engaged by a Buyer, the parties will agree on the level of compensation the agent expects to receive in the transaction, commonly from the Listing Agent. This level of compensation is called the “Baseline.”
They will also agree whether the client will make up any shortfall if the Seller or Listing Agent are not offering compensation equivalent to the “Baseline” to a Buyers’ Agent.

Should the agent show a property to the client with a different level of compensation offered than that which is established as the Baseline, the agent is compelled to disclose the amount of compensation to the Buyer before the Buyer makes a decision on the property.
This disclosure may be done verbally at time of showing, but disclosure will be confirmed in writing prior to the time that an offer is written.

“Additional Compensation” may take many forms.
It may be a co-broke commission offer from a Listing Agent that is higher than the agreed Baseline compensation.
It may be a Buyers’ Agent bonus offered by the Seller or Listing agent.
It may be as simple as the kickbacks offered by home warranty companies for selling their warranties. This is one disclosure that is required of Listing Agents or Buyers’ Agents, i.e., additional compensation from a third party.
Additional compensation may be as intangible as the possiblilty of the Buyers’ Agent getting a free cruise holiday from a builder as a reward for selling multiple homes in a community. Prizes such as this must be disclosed to every client an agent brings to the community, not just the client who finally enables the agent to claim the prize.

Disclosure rules regulate “firm level” disclosure, since commissions and other compensation are paid to the firm or Broker-in-Charge.
This may prompt smart Buyers to ask a few questions that dig a little deeper than the legally mandated disclosure.

They might ask their “Individual Agent”:
1. Will you make more money personally if you sell me one of your firm’s listings?
2. If “Yes,” how much more money will you make?
3. If “Yes,” will you disclose this additional personal compensation to me when you show me your company’s listings?
4. Will you also show me homes I want to see that are listed with other firms?

Realtors, members of the North Carolina Association of Realtors, must now define the “baseline” compensation in NCAR Standard Form 201, “Exclusive Right to Represent Buyer,” revised 10/2008.
Earlier versions of this form are now obsolete, and NC Buyer clients under earlier agreements must be notified of any compensation for every home shown, since no Baseline was established.
“Notification of Additional Compensation” can be done using the newly introduced Form 770, also dated 10/2008.

With some huge Buyers’ Agent bonuses being offered currently, as well as Buyers’ Agent commissions as high as 6% or 8% by some builders in the Raleigh Cary area, I embrace the new rule and the transparency it will create.
Clients deserve to know if they are being steered to high agent compensation homes rather than to properties that fit their needs.