Is a seller’s “condition” to signing a sales contract a material fact?

QUESTION:  I showed my out-of-town buyer clients a property located in a golf course community. They liked the property and submitted a full-price offer. We received a counter which informed the buyers that they would have to purchase a golf club membership with a $10,000 initiation fee as part of the contract. The listing agent told me that this payment would be a condition to any sale because, in the event of such a payment, the seller would receive a substantial refund of his own initiation fee . This condition was not disclosed in the MLS and was not disclosed to me when I made an appointment to show the property. My buyers do not play golf, have no interest in joining a golf club, and now have to make another trip to North Carolina to find another home. Was the seller’s condition a material fact that the listing agent should have disclosed?

ANSWER:  We would recommend disclosure in the scenario you have described . We note that typically, it would be in the interest of everyone concerned for the listing agent to disclose any significant conditions a seller will insist on attaching to a sale of his or her property. For example, if a seller will only consider cash offers, that fact should be disclosed in the MLS listing. That way, agents don’t waste time showing properties to (and possibly preparing offers for) buyers who will never be able to make an all-cash purchase.

If the practice of requiring the purchase of a club membership is widespread in your community, it is arguable that buyer agents who show golf course properties should know about the incentives being offered. Ideally, those buyer agents would inquire about such incentives before submitting an offer, and would also ask the listing agent if the seller would be looking to condition any sale on the purchase of a membership.

Having said that, we believe that if a seller will insist that any buyer purchase a $10,000 club membership as a condition to signing a sales contract, that condition is a material fact that should be disclosed by the listing agent prior to the time that a buyer submits an offer for the property. We relayed this scenario to an attorney with the North Carolina Real Estate Commission, and that attorney reached the same conclusion.

The Real Estate Commission’s admittedly broad definition of a material fact is “any fact that is important or relevant to the issue at hand.” We believe that the seller’s condition you have described falls within this definition. Furthermore, Article 2 of the REALTOR® Code of Ethics requires REALTORS® to avoid concealment of pertinent facts relating to the property or the transaction. In our view, the seller’s condition is a fact that is pertinent to the transaction being contemplated by the parties.