Real Estate Agents, under all circumstances and regardless of any fiduciary obligations to their client, must always disclose material facts. Indeed, real estate agents must seek out and uncover material facts so they can disclose them to all parties in the transaction.

A material fact is any factual information that could impact the decision of a buyer to buy or a seller to sell. This includes, but is not limited to, the following:

* Zoning, infrastructure projects, flood zones and private roads
* The ability for the buyer to buy or the seller to sell.
* Property easements, encroachments, needed repairs, deed restrictions, occupancy limitations and covenants.
* Presence of a cemetery (but not hauntings or other stigmatized property situations)
* Square footage, unpermitted additions, septic capacity, assessments
* Anything specifically indicated by the buyer or seller.

That last one seems like a big catch-all so let's take a closer look at it.

The ability to put a pool in the backyard of a home is not, by itself, a material fact. But if the buyer mentions to their real estate agent that it is important to them to have a home where they can put in a pool - that becomes a material fact. As a material fact, the real estate agent must work to determine if a pool can be installed. The agent would need to review the covenants and deed restrictions, provide these documents to the buyer and recommend the buyer include a review of the property with the city as part of the buyer's due diligence. And if the real estate agent learns that a pool can not be installed, the real estate agent must disclose this to all parties in the transaction.

As another example, if the real estate agent is touring the property and notices moisture on the basement wall, the agent needs to inquire about the reason for the moisture, request any repair documentation to prove repairs were completed and disclose this information to all parties in the transaction. This must be done even if the real estate agent's client does not want it disclosed.

See previous posts on "Does Your Realtor Work for You?" and "Becoming a Client with a Realtor Agency Agreement" for background information prior to reading this post.

When a client hires a real estate agent by signing a listing or agency agreement, that client is actually hiring the real estate agent's entire firm not just the real estate agent themselves. A common transactional situation is that the buyer and seller each have their own real estate agents who work for different firms and operate in the best interest of their respective client. Things can get more complicated, and a conflict of interest can exist, when the same real estate firm is used by both the buyer and seller.

For example, if the buyer and seller both hire John Agent working for XYZ Realty, the buyer and the seller have hired the same firm (XYZ Realty). Since a single firm can not simultaneously provide the fiduciary duties of OLDCAR (see previous posts as noted above) to both the buyer and the seller, a conflict of interest exists. Real estate agents call this situation dual agency and it reduced both client's protections and benefits to fairness, honesty and disclosure of material facts.

Let's look at a couple of common scenarios where dual agency can arise:

1. Bobby Buyer signs a Buyer's Agency Agreement with John Agent of XYZ Realty. John Agent shows Bobby Buyer several properties over the course of a couple of weeks. One of the properties John Agent shows is listed by Sally Agent also of XYZ Realty. If Bobby Buyer decides he is interested in the property, a dual agency will exist. As a result, neither the seller nor Bobby Buyer will benefit from OLDCAR. Instead, both will only get fairness, honesty, and disclosure of material facts.

2. A seller hires Sally Agent from XYZ Realty and Sally places a sign in the front yard advertising the property for sale. Bobby Buyer sees the sign and, using the phone number on the sign, calls Sally Agent to see the property. At this point, it is the sellers that are Sally's clients and to which Sally must provide OLD CAR. Bobby Buyer is not a client so Sally is only obligated to provide Bobby Buyer with fairness, honesty, and disclosure of material facts. Once Bobby Buyer signs an agency agreement with Sally Agent a dual agency situation would exist. As a result, neither the seller nor Bobby Buyer would be entitled to OLDCAR - settling instead for fairness, honesty, and disclose of material facts.

In the above scenarios, the buyer and seller can get back their OLDCAR benefits by having the real estate firm specifically assign one named real estate agent to represent the seller and another named real estate agent to represent the buyer. When specific named agents are assigned in this way it is called designated dual agency. In the first scenario, this seems rather straight-forward since the buyer and seller are already working with different agents within the firm. In the second scenario, the firm would have to replace Sally Agent with another real estate agent for either the buyer or the seller. The important thing about all this is that unless dual agency is mitigated by designated dual agency, the real estate agent's obligation to the client is diminished from OLDCAR to fairness, honestly and disclosure of material facts.

Several events must occur for dual agency and designated dual agency (a form a dual agency) to exist. The firm must offer dual agency, the client must agree to dual agency and a conflict of interest must arise. Real estate agents that operate under dual agency without proper approval from all parties in the transaction are engaging in undisclosed dual agency which is a serious violation.

All of this can be confusing and is typically something buyers and seller are not fully aware of when they work with a real estate agent. Hear the explanation directly from the North Carolina Real Estate Agent Commission at the following links:

Working with Real Estate Agents (Buyer)

Working with Real Estate Agents (Seller)

When someone is hired, they expect to get paid and generally speaking they are accountable to whoever is paying them. Real estate agents are different, they work for whoever signs an agency agreement with them which is not always the same person paying. And the distinction is not simply a matter of money.

When an real estate agent works for you, you are called a client. A client, through the agency agreement, is owed certain fiduciary duties real estate agents call OLD CAR:

OBEDIENCE - Obey legal real estate related instructions.
LOYALTY - Keeping the client's best interest first, ahead of any other party including the agent themselves.
DISCLOSURE - Communicate to the client any and all information which may benefit them in making their buying/selling decision.
CONFIDENTIALITY - Keep secret information about the client.
ACCOUNTING - Accurate tracking of all documents and funds in the transaction.
REASONABLE CARE - Provide competent knowledgeable advice and guidance throughout the transaction.

If you have not signed an agency agreement with your realtor, you are not the client, you are not entitled to the OLD CAR protections and benefits and the realtor you are talking to is most likely legally obligation to work for the other party. While realtors working for the other party are still obligated to provide you with fairness, honesty and disclosure of material facts, they are also obligated to information the other party of any information they learn about your price, terms and motivations which ultimately hurts your negotiating position.

Find out how to protect yourself by being a client in "Becoming a Client with a Realtor Agency Agreement"