Legal QUIZ_Insight | May 2025

Legal QUIZ 

BY JOHN WAIT, GENERAL COUNSEL 

These questions are based on weekly Q&As published in the REALTOR® Rundown between September 2024 & February 2025.

1. Do I need a written buyer agreement when the buyer’s sister is touring the home and sending live video to the buyer? 

Answer 

Yes. Under MLS rules, agents must have a written buyer agreement prior to touring a home when the agent is “working with” the buyer. The “working with” language is meant to including agents who are providing “full or limited brokerage representation or services for the buyer (including transaction brokerage)—such as identifying potential properties, arranging for the buyer to tour a property, performing or facilitating negotiations on behalf of the buyer, presenting offers by the buyer, or other services for the buyer.” NAR FAQ 73. 

“Touring a home means the buyer and/or the MLS Participant, or other agent, at the direction of the MLS Participant working with the buyer, enter the house. This includes when the MLS Participant or other agent, at the direction of the MLS Participant, working with the buyer enters the home to provide a live, virtual tour to a buyer not physically present.” NAR FAQ 74. 

Since the agent is helping facilitate a live, virtual tour for the buyer, a written buyer agreement is necessary.Q&A Release Date: 9/26/2024 

2. Is the Cooperative Compensation Agreement (Form 220) still effective if the buyer and seller do not go under contract and the date passes in paragraph 3? 

Answer 

No. It is important to set a specific termination date in Form 220. As a suggestion only, the termination date should be a short period of time, such as a few days or weeks. By inserting a specific date in paragraph 3 of Form 220, agents will know when a shared Form 220 can no longer become binding if a specific buyer and seller go under contract. Making sure that Form 220 expires as to a particular buyer agent will help protect the seller and listing firm should a specific buyer have more than one agent. 

It is not necessary that the date in paragraph 3 extend to the end of a transaction. An earned fee in Form 220 remains enforceable through closing once the buyer and seller sign a purchase agreement.Q&A Release Date: 11/21/2024 

3. Does a seller have the same duty to disclose material facts as a listing agent? 

Answer 

No. A material fact is any fact that could affect a reasonable person’s decision to buy, sell, or lease property. A material fact must be disclosed by a broker to the parties in the transaction and any interested third parties regardless of the broker’s agency role within the transaction. 

A broker always has a duty to disclose material facts, but a seller does not always have that duty. 

A seller must disclose material facts when such facts are only known to the seller and not within the diligent attention, observation, and judgment of the buyer. In other words, if there is a material latent defect on the property only known to the seller, and the buyer cannot discover the defect through reasonable diligence, the seller has a mandatory and affirmative duty to disclose. 

A seller’s duty to disclose material facts is separate and in addition to their obligation to complete the Residential Property and Owners’ Association Disclosure Statement (RPOADS). This means that the seller can choose to mark “no representation” in the RPOADS, as allowed by statute, but the seller still has a duty to disclose material latent defects not within discovery of the buyer by reasonable diligence as explained above. 

If the seller checks “no representation” throughout the RPOADS, then they will need to disclose latent material defects another way. If a listing agent becomes aware of material facts that are not in the RPOADS, then the listing agent has a duty to disclose such facts even if the seller does not disclose them.Q&A Release Date: 2/13/2025 

4. Is it a good idea to retain my real estate records longer than the three years required by the License Law? 

Answer

Yes. In the event a legal claim is made against a broker or a firm, the firm’s transaction file will be absolutely crucial in defending that claim. While many legal claims in North Carolina have a three-year statute of limitations, the fact is that many claims can be brought after that three-year period. For example, the statute of limitations for an action alleging a violation of the Unfair and Deceptive Trade Practices Act is four years. A claim of constructive fraud based on an alleged breach of fiduciary duty has a ten-year statute of limitations. 

Even though the statute of limitations for actions alleging fraud or negligent misrepresentation is only three years, that limitations period does not begin to run until the aggrieved party discovers (or reasonably should have discovered) the facts constituting the fraud or misrepresentation. 

This “discovery rule” can extend the time for filing a claim well beyond three years. The best way for brokers and firms to protect themselves from claims brought more than three years after a transaction is complete is to retain their transaction files for significantly longer than the License Law requires.Q&A Release Date: 11/14/2024 

5. Is it risky for my seller consider a “subject to” offer or an offer that contains a wraparound mortgage? 

Answer

Yes. A “subject to” purchase means that the buyer agrees to pay the seller’s mortgage, but the seller remains liable under the promissory note and deed of trust for any potential default. The buyer typically takes title to the property, even though the seller remains named in the loan documents. 

A wraparound mortgage is similar to a “subject to” purchase in that the seller deeds their interest to the buyer and the seller remains liable on the original loan. The difference is that in a wraparound mortgage, the buyer agrees to pay the seller more than what the seller may owe on the original loan. 

The seller therefore offers the buyer a type of seller financing. When the buyer makes a payment, the seller pays their own mortgage and has flexibility to use any overage as they see fit. 

Both of these arrangements have enormous risks. First, the seller has no title to the property for which they remain financially liable. If the buyer does not pay, the seller has no property to sell to satisfy their obligation to the bank. Second, unless the bank approves of the transaction first, the bank can accelerate the entire amount of the loan and demand payment once it discovers that the seller has violated the loan terms by conveying the property to the buyer.Q&A Release Date: 12/19/2024 

6. If a buyer puts a Due Diligence Fee check in the mail, is it considered “delivered” under the Offer to Purchase and Contract (Form 2-T)? 

Answer

No. According to the North Carolina Real Estate Manual, “[t]he mailbox rule basically operates only as a method of communicating acceptance of an offer. It does not apply to any other situation.” Form 2-T requires that the Due Diligence Fee be “delivered,” not mailed. Since the mailbox rule does not apply to delivery of the Due Diligence Fee, the payment is not considered delivered until it actually reaches either the seller or the listing agent.Q&A Release Date: 02/06/2025 

7. Do buyer agents have a duty to disclose material facts to other, later buyers if their client terminates a contract? 

Answer

No. Brokers must disclose any material facts to the parties involved in the transaction. If a buyer elects to terminate their contract, that buyer agent does not have an obligation to disclose any material facts to parties represented by other agents who may later become interested in purchasing the subject property. Doing so may well be wrongful interference with a seller’s effort to sell their property.Q&A Release Date: 10/3/2024 

8. Is it unauthorized practice of law if a broker drafts an addendum to their own agency agreement? 

Answer

No. Section 93A-6(a)(11) of the Real Estate License Law authorizes the Real Estate Commission to discipline a licensee for performing any legal service, as defined in section 84-2.1 of the North Carolina General Statutes, or “any other acts constituting the practice of law.” Section 84-2.1 of North Carolina’s General Statutes defines “practice law” to be “performing any legal service for any other person, firm or corporation, with or without compensation, specifically including the preparation of… deeds, (and other legal documents).” In this question, the agent is a party to the contract and is therefore not drafting a document for someone else.Q&A Release Date: 10/31/2024 

9. Once a buyer agent ascertains what cooperative compensation is being offered, can it be unilaterally changed by the listing firm after an offer is submitted? 

Answer

No. Article 3 of the Code states that “REALTORS® shall cooperate with other brokers except when cooperation is not in the client’s best interest. The obligation to cooperate does not include the obligation to share commissions, fees, or to otherwise compensate another broker.” Standard of Practice (“SOP”) 3-1 explains that cooperative compensation, if available, must “be ascertained by cooperating brokers before beginning efforts to accept the offer of cooperation.” 

Once cooperative compensation has been ascertained, SOP 3-2 states that any change to cooperative compensation “must be communicated to the other REALTOR® prior to the time that REALTOR® submits an offer to purchase/ lease the property.” And, importantly, SOP 3-2 also states that after “a REALTOR® has submitted an offer to purchase or lease property, the listing broker may not attempt to unilaterally modify the offered compensation with respect to that cooperative transaction.” SOP 3-3 does permit listing agents and cooperating brokers to mutually agree to change cooperative compensation, even after an offer is presented.Q&A Release Date: 9/5/2024 

10. Does Form 2-T have a provision to make a contract contingent on the sale of the buyer’s current property? 

Answer

No. The buyer’s representation in the Offer to Purchase and Contract (Form 2-T) regarding their current home is merely information provided to the seller. It does not create a contingency. The purpose of that representation is to enable the seller to evaluate the strength of the buyer’s offer. It is not intended to allow the buyer to terminate outside the Due Diligence Period and obtain a refund of their Earnest Money Deposit in the event they cannot sell their current home. 

If a buyer wishes to create a true contingent sale using Form 2-T, then they must obtain an attorney-drafted, custom addendum and attach it to the contract.Q&A Release Date: 2/20/2025 

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