If you are buying a home, you'll find that most states' legislatures require that the home seller or real estate agent tell you about any known problems with the home before the purchase is finalized. In other words, the house’s owner must give you fair warning of any significant problems, so that you know what you’re buying and whether it's worth what you're paying for it.
Unfortunately, North Dakota has no such requirements. This means that sellers in North Dakota do not face any requirement to tell you if, for example, the roof leaks in the rain, or the basement toilet is routinely clogged. As a potential buyer in North Dakota, how should you deal with this lack of regulation?
North Dakota has some of the lowest levels of real estate disclosure regulation in the United States. While most states have passed clear legislation that would require a home seller to give a written disclosure report to potential buyers, North Dakota has not. The typical report in other states identifies any and all physical defects in the property, from a defective garage door to a leak in the cellar.
States that do not have this sort of detailed legislation ordinarily at least have a state agency or commission that regulates real estate agents and requires agents to make certain disclosures about the property that they are selling. The North Dakota Real Estate Commission fills this role, regulating the licensing of agents throughout the state.
Section 43-23-12.1(2) of the License Law requires that “If a buyer… is not represented by a real estate brokerage firm in the real property transaction, [the seller’s real estate agent]… owe[s] the following legal duties: to perform customary acts typically performed by real estate licensees in assisting a transaction to the transaction's closing or conclusion if these acts are to assist the customer for which the services are directly provided; to perform these acts with honesty and good faith; and to disclose to the customer any adverse material facts actually known by the licensee which pertain to the title of the real property, the physical condition of the real property, and defects in the real property.”
In other words, if you are not represented by your own broker in the transaction, then the seller’s real estate agent has at least some minimal professional duties and responsibilities. He or she must assist with the mechanics of the transaction, do so with “honesty and good faith,” and disclose any “adverse material facts” that he or she “actually” knows about the property. These facts should relate to both the home’s physical condition and the seller’s legal title. Physical defects could include such things as a moldy basement or a broken HVAC system. A legal defect might include an easement running over the property, or some adverse claim to the title.
For at least three reasons, unrepresented homebuyers in North Dakota (which is likely a minority of buyers to begin with) would be wise to not rely too heavily upon the seller’s real estate agent’s disclosures.
First of all, not all real estate agents will be honest with you, despite their professional obligations and the threat of a lost license under the statute. Remember, they will typically receive a percentage of any sale. They therefore have a natural incentive to motivate you to buy the home, and may do so by being less than forthcoming about any defects with the home about which you'd want to know.
Second, you will notice that the statute does not require the agent to give you written disclosures of any defects. This is somewhat unusual; most state statutes are explicit that defect disclosures cannot be oral, but North Dakota leaves that issue somewhat ambiguous. Without a written record of what disclosures were made to you (and what disclosures were not made to you), you lack protection if you find a serious problem with the home after moving in. For example, imagine that you close on the home and then realize that there is no working electricity on the second floor. You want to sue, but the real estate agent claims that he or she told you of the defect and you chose to buy the home anyway. Oral disclosures do not protect you from potential liability.
Third, notice that the statute requires only that the real estate agent disclose defects that are “actually known.” Real estate agents in North Dakota are under no duty to affirmatively inspect the home, or verify its condition, before sale. If they do not happen to know of a defect; probably because the seller never mentioned it; they have no obligation to disclose anything.
As you can see, North Dakota’s minimal disclosure regulation is not exactly buyer-friendly. Given this, your best security is to hire your own professional inspector. Your real estate attorney or agent can probably suggest someone with a good reputation. This person can give you an independent assessment of the home, so that you know exactly what you are buying and can negotiate over repairs.
An additional possibility is to ask the seller to provide written disclosures about the state of the property. This is, after all, a negotiated purchase, and you have a right to ask for information. A seller who refuses may have something to hide; and a seller who complies will have every reason to be honest, because fraud can be a basis for legal action even without a separate law requiring seller disclosures. While the inspectors' findings are likely to be the most complete, information from the seller, who may have lived in the house for years and knows its history and quirks, can be an invaluable guide for followup by the inspector.