What is a material fact in real estate?

In real estate, disclosure is everything. Buyers and sellers rely on transparency to make informed decisions, and failing to share important details can lead to legal trouble. This is where the concept of a material fact becomes critical.

So, what is a material fact in real estate? It’s any piece of information that could affect a person’s decision to buy, sell, or lease a property. These facts must be disclosed by real estate professionals and property owners alike to ensure ethical and legal transactions.

In this article, we’ll define what is a material fact, look at real-world examples of material facts in real estate, and explain what laws and professional responsibilities require disclosure.

Definition: What Is a Material Fact?

A material fact is any detail that a reasonable person would find important when deciding on a real estate transaction. These facts can influence the property’s value, appeal, usage, or legal standing. It’s essential that such information be disclosed to potential buyers or tenants before the deal is completed.

In simple terms: If you would think twice about buying the home because of it, it’s probably a material fact.

Understanding what a material fact is helps protect all parties involved in a transaction from fraud, misrepresentation, and legal liability.

Examples of Material Facts in Real Estate

Let’s take a closer look at what kind of information is considered a material fact.

Physical Property Conditions:

• Roof damage or water leaks
• Presence of mold or termites
• Faulty wiring or plumbing
• Foundation cracks or structural issues

Legal & Zoning Issues:

• Zoning violations
• Pending lawsuits or liens
• Property boundary disputes
• Unpermitted renovations

Location-Based Factors:

• Flood zones or fire risk areas
• Proximity to toxic waste sites or high-crime areas
• Noise pollution or nearby developments

Psychological Stigmas (Varies by State):

• Previous deaths on the property
• Haunted reputation or notorious history

Note: Not all jurisdictions treat psychological stigmas the same; some require disclosure, others do not. If you’re preparing for your real estate exam, expect questions on both tangible and intangible material facts.

Imagine Mary buys a home and later discovers that the basement floods every spring, something the seller knew but failed to mention. This would be a material fact, as it affects the property’s desirability and potential repair costs. If you’re preparing for your real estate exam, expect questions on both tangible and intangible material facts like this.

What Are Material Facts in Real Estate Transactions?

In the context of a transaction, material facts must be disclosed by:

• Real estate agents
• Sellers
• Landlords
• Developers

Failure to do so can result in:

• Civil lawsuits
• Loss of license for agents
• Canceled transactions
• Regulatory fines

📌 Key Point: It’s not just unethical to hide material facts—it’s illegal in many states.

Legal Duty to Disclose Material Facts

The duty to disclose material facts comes from both state real estate laws and common law principles of fair dealing.

For Real Estate Agents:

• Agents must disclose all known material facts to all parties, even if they are unfavorable to their clients.
• This duty of honesty and fair dealing protects buyers from making uninformed decisions.

For Sellers:

• Most states require sellers to complete a property disclosure statement.
• Intentionally hiding defects or issues can be considered a form of fraud or misrepresentation.

✅ Pro tip: When in doubt, disclose. It builds trust and reduces liability.

What Is Not Considered a Material Fact?

Not every detail needs to be disclosed. Here are a few examples of non-material facts (unless otherwise required by local law):

Not all information about a property is legally required to be disclosed. Certain details, although potentially important to some buyers on a personal level, are generally not considered material facts unless local law dictates otherwise.

For instance, if a seller is going through a divorce, that might create urgency in the sale, but it doesn’t directly impact the condition, value, or legal status of the property. Therefore, it’s not typically a required disclosure.

Another common example is noisy neighbors. Imagine a buyer later complains about a dog barking next door every morning. While it can be annoying, this type of situation is subjective and doesn’t legally affect the property’s value or structural condition.

Deaths in the home are a particularly sensitive topic. In many states, if someone dies in the house from natural causes, sellers are not obligated to disclose it. However, in a few states, such as California, this must be disclosed if it occurred within a specific timeframe preceding the sale.

Finally, a seller’s personal urgency to close quickly, whether due to a job relocation or financial reasons, is also not considered a material fact. This is a motivation behind the sale, not a condition of the property.

These issues may affect a buyer’s feelings, but are not legally required disclosures in many jurisdictions.

Real Estate Exam Tip: Know the Difference

If you’re preparing for a licensing test, it’s important to distinguish between:

Material Facts: Must be disclosed. Affect value or decision-making.

Example:

Imagine a seller knows that the roof has an active leak but chooses not to mention it. This is a material fact because it affects the structural integrity and repair cost of the home. The agent and seller are legally obligated to disclose it to potential buyers.

Immaterial Facts: Not required to disclose unless they directly relate to the property’s condition or legal standing.

Example:

Suppose a seller shares that they’re relocating due to a job change and need to close quickly. While this may explain their motivation, it doesn’t impact the property’s condition or title, so it’s not a material fact.

Another example is if a person passed away in the home due to natural causes. In many states, that’s considered an immaterial fact and doesn’t need to be disclosed, unless the law explicitly requires it.

Be prepared for multiple-choice questions that ask which of the following is a material fact and scenarios that test your understanding of disclosure laws.

Why Understanding Material Facts Matters

Whether you’re a buyer, seller, or agent, knowing what the material facts in real estate are empowers you to:

• Avoid legal issues
• Ensure fair and honest transactions
• Build long-term trust with clients
• Protect your reputation and license

Remember, a well-informed transaction is a successful transaction.

Conclusion: Transparency Protects Everyone

To summarize, what is a material fact in real estate? It’s any information that could influence a person’s decision about buying, selling, or leasing property. These facts must be disclosed fully and honestly to protect all parties involved.

Failing to disclose material facts can lead to serious consequences—ethically, legally, and financially. As a buyer, always ask the right questions. As a seller or agent, always disclose what you know. That’s how you ensure smoother closings and stronger professional credibility.

Want to dive deeper into real estate concepts that matter? Visit Lexawise for expert articles, exam prep tools, and everything you need to succeed in your real estate journey.