More Buyer Beware!
Buyer Beware! The NC Court of Appeals has provided us another opinion to solidify prior cases in North Carolina warning buyers in real estate transactions to conduct independent due diligence rather than rely solely on Seller disclosures.
In the case of Stevens v. Heller/BFD/Re/Max United, the Stevens purchased an investment property from Heller who is also a licensed real estate broker in NC. When, after closing, Stevens discovered problems with the home’s HVAC system, Stevens asserted a claim for breach of contract, fraud, fraud in the inducement, negligent misrepresentation and unfair and deceptive practices. Stevens alleged that the HVAC system in the property needed to be completely replaced and that Heller knew or should have known about this defect but failed to disclose it to Stevens prior to closing. Stevens consistently claimed that Heller had a heightened duty to inform of defects of which she was aware or should have been aware because she was an owner of the property and a licensed real estate broker.
While sellers in North Carolina are required to furnish a residential real property disclosure statement disclosing the characteristics and conditions of the property to a buyer, the owner has the choice of making ‘no representations’. The representations made by sellers, if any, should be truthful per the seller’s actual knowledge. This case confirms that Buyers can reasonably rely on the Seller’s representations but Buyers can’t rely solely on the disclosure information and should conduct their own independent due diligence. If buyers do not conduct their own inspections, the court says they will not be able to maintain claims against the seller for failure to disclose unless the buyer can show that the seller’s misrepresentations caused their lack of reasonable diligence. The standard form Offer to Purchase in North Carolina advises buyers that the property is being sold in its current condition and cautions buyers to negotiate repair requests prior to the expiration of their due diligence period.
In this buyer beware case, Heller had HVAC maintenance performed just prior to closing and the contractor damaged the system. She was provided with a report saying the damage had been repaired and she disclosed all the information to the Stevens. The court said the Seller was entitled to rely on that report and that she had made no knowing misrepresentation to the Buyer.
Further, the court rejected the argument that owners of real property who are also licensed real estate brokers are held to any heightened agency or duty to a Buyer. Stevens had a buyer’s agent and was entitled to inspect the property at will during the due diligence period.
Shipman & Wright, LLP consistently counsels buyers, sellers, and real estate brokers and agencies on their rights, obligations, and duties under purchase/sale and agency agreements in residential and commercial transactions. If you have a need for guidance or think you have a claim. Call us!