Lecture Notes on Disclosure and Agency Issues

Key Concepts

• Disclosure is a critical aspect of agency as it determines what information should be shared with clients and customers.
• Different rules apply depending on whether you are dealing with a client or a customer.
• The lecture emphasizes the importance of understanding these distinctions as they form the basis for multiple test questions.

Clients vs. Customers

• Clients: Individuals whom you represent and owe full disclosure.
• Customers: Individuals you do not represent; disclosure is limited to material facts.

Disclosure to Clients

• Tell clients everything that could impact their decision-making.
• Example: If representing a seller, disclose if the buyer is willing to pay more.
• Full transparency includes all offers, potential buyers, and any relationships with potential buyers.

Dual Agency

• Limits disclosure as both parties are clients; do not disclose anything that could harm the other party.
• Example: Do not disclose the other party's reason for engaging in the transaction.
• Dual agency removes much of the advisory role and disclosure responsibilities.

Material Facts

• Material Facts: Must be disclosed to both clients and customers.
• Important because failure to disclose can lead to lawsuits.
• Clients may be unhappy with disclosure of material facts as they often harm their negotiating position.
• Examples of Material Facts:
  • Property defects (e.g., leaks, structural issues, pest infestation).
  • Information affecting property value (e.g., zoning changes, covenant restrictions).
  • Ability of a party to close a transaction.
  • Special importance to the buyer (e.g., not wanting a septic tank).

North Carolina Disclosure Rules

• North Carolina law is stringent; brokers must disclose what they know or should have reasonably known.
• Brokers are responsible for obvious issues like water stains or foundation cracks even if they haven't been explicitly told.

Things That Are Not Material Facts

• Presence of registered sex offenders.
• Stigmatized properties (e.g., haunted houses, suicides, or murders).
• Optional disclosures come with the responsibility of accuracy.

Test Question Tips

• Identify whether the situation involves clients, customers, or dual agency to determine disclosure obligations.
• Understand the difference between "all material facts" and "reasonably known material facts."

Interactive Exercise: Kahoot Game

• The lecture included a Kahoot quiz to reinforce understanding of material facts and agency roles.
• Questions covered examples of material facts, dual agency disclosures, and the importance of accuracy when disclosing optional information.