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By Jonathan Lee•Last Updated May 22, 2025

Understanding Material Facts in Real Estate: What Buyers and Sellers Must Know

Introduction: The Critical Role of Material Facts in Real Estate

Material facts are at the core of every transparent and legally compliant real estate transaction. Whether you are considering buying, selling, or leasing property, understanding what constitutes a material fact-and how to handle disclosure-can protect your investment, reputation, and legal standing. This guide delves deep into the definition, examples, legal obligations, and practical steps for identifying and managing material facts in real estate transactions. ^[1]

What Is a Material Fact?

A material fact in real estate refers to any detail or information that could influence a reasonable person’s decision to buy, sell, or lease a property. This includes facts that may affect the property’s value, desirability, or the terms under which someone would be willing to proceed with a transaction. Material facts can be related to the physical condition of the property, its legal status, or external issues such as zoning changes or environmental hazards. ^[2] If a buyer or tenant would have made a different decision had they known the information, it is likely considered material.

Key Characteristics of Material Facts

Information that could change the value or desirability of the property
Details that may cause a buyer or tenant to reconsider their decision
Facts that could prompt a change in a purchase or rental price offer
Issues that are not obvious and would not be discovered through routine inspection

In practical terms, if a fact would have influenced your own decision as a buyer or seller, it is material and should be disclosed.

Examples of Material Facts in Real Estate

Material facts are not limited to obvious physical defects. They may include a broad range of information, such as:

Structural defects : Foundation problems, roof leaks, plumbing issues
Environmental hazards : Asbestos, lead-based paint, mold, radon gas
History of damage : Previous flooding, fire, or termite infestation
Legal issues : Ongoing litigation, property line disputes, zoning violations
Criminal history : The property was the site of a major crime
Building code violations : Unpermitted renovations or additions
Unusual circumstances : Property previously used as an illicit drug laboratory, or subject to adverse possession claims

Even facts that relate to prior issues-such as a repaired roof leak-may need to be disclosed if they could affect a buyer’s decision. ^[1]

Legal and Ethical Disclosure Requirements

In the United States, both federal and state laws require sellers and real estate professionals to disclose known material facts. For example, the North Carolina Real Estate Commission and similar agencies in other states mandate that brokers and agents actively investigate and disclose any fact that could affect a buyer’s decision. ^[4] The duty to disclose is affirmative: agents cannot simply claim ignorance if a reasonable inspection would have revealed the issue.

Sellers are required to complete property disclosure forms, which vary by jurisdiction. These forms typically ask about structural issues, environmental concerns, legal matters, and other relevant information. ^[5]

Consequences of Failing to Disclose Material Facts

Failure to disclose material facts can result in:

Legal action for damages or rescission of the contract
Loss of professional licenses for real estate agents and brokers
Damage to reputation and credibility

Buyers who discover undisclosed material facts after purchase may have legal remedies, including rescinding the sale or seeking monetary damages.

How to Identify Material Facts

Determining whether a fact is material involves asking whether it would influence a reasonable person’s decision regarding the property. Helpful questions include:

Would this information affect the property’s value or desirability?
Is the information known only to the seller or agent?
Would disclosure of this fact change the potential buyer’s or tenant’s willingness to proceed?

Real estate agents and sellers should conduct thorough visual inspections, consult with professionals (such as inspectors or attorneys), and review all available documentation to identify material facts. ^[4]

Practical Guidance for Sellers, Buyers, and Agents

For Sellers

To ensure compliance and avoid legal trouble:

Complete all required disclosure forms honestly and thoroughly.
Disclose any known past, current, or recurring issues, even if you believe they have been resolved.
If uncertain about whether something is a material fact, err on the side of disclosure or consult with a real estate attorney.
Maintain records of repairs, inspections, and communications related to property condition.

For Buyers

Buyers should:

Carefully review all disclosure documents provided by the seller or agent.
Order independent property inspections and environmental assessments as appropriate.
Ask direct questions about the condition, history, and legal status of the property.
Consult with a real estate attorney if any facts are unclear or appear to have been omitted.

If you suspect a material fact has been withheld, you may be able to pursue remedies through state real estate regulatory agencies or the courts. For jurisdiction-specific information, you can search for your state’s real estate commission or department of consumer affairs online.

For Real Estate Agents and Brokers

Real estate professionals must take proactive steps, including:

Conducting thorough visual inspections and documenting findings
Disclosing all known material facts to both parties in writing
Staying current with state and local disclosure laws and regulations
Using standardized checklists and forms to ensure all material facts are addressed

For additional guidance, consult your state real estate regulatory authority or seek continuing education on disclosure best practices.

Case Studies: Material Facts in Action

Consider the following real-world scenarios to illustrate the importance of material facts:

Case 1: Foundation Issues Concealed – A seller failed to disclose known foundation problems. The buyer, discovering the issue post-closing, filed a lawsuit and was awarded damages due to the significant repair costs. ^[5]

Case 2: Environmental Hazard Revealed – A buyer learned after purchase that the property contained asbestos, which had not been disclosed. The seller was held liable for remediation costs and legal fees.

Case 3: Stigmatized Property – A house previously used as a crime scene was not disclosed to a buyer, who claimed the stigma reduced the property’s value. Courts in some jurisdictions have ruled that psychological or stigmatizing facts may be material and require disclosure, depending on state law. ^[3]

Step-by-Step Guidance for Accessing Disclosure Resources

To access disclosure forms and educational materials, consider the following steps:

Search for your state’s real estate commission or department of real estate online. For example, in North Carolina, you can visit the North Carolina Real Estate Commission’s official site and look for disclosure forms and bulletins.
Request a copy of the property disclosure statement from your real estate agent or attorney for review before making an offer.
If you need additional assistance, contact your local board of REALTORSÂ® or seek legal advice from a real estate attorney.
Stay updated with continuing education courses or seminars on disclosure laws and best practices. Many state agencies and REALTORÂ® associations offer these resources.

If you are unsure where to start, you can search for “[Your State] property disclosure form” or “[Your State] real estate commission” in your preferred search engine for official resources and downloadable documentation.

Challenges and Solutions in Disclosing Material Facts

Common challenges in disclosure include uncertainty about what must be revealed, fear of reducing property value, or lack of documentation. The best solution is to disclose any information that could possibly be material, maintain thorough records, and consult professionals when needed. Transparent disclosure not only fulfills legal and ethical obligations but also builds trust and reduces the risk of disputes.

Alternatives and Additional Protections

In some jurisdictions, buyers may have the option of purchasing title insurance or specialized home warranties to protect against undisclosed issues. However, these products may not cover all types of material facts. The most reliable protection remains thorough due diligence and open communication between parties.

Summary: Key Takeaways for Managing Material Facts

Material facts are any details that could affect a property transaction’s outcome. Sellers, buyers, and agents all have roles in identifying, disclosing, and verifying these facts. When in doubt, opt for transparency, consult professionals, and utilize state-specific disclosure resources to navigate this critical aspect of real estate successfully.