Want to know what is a material fact in real estate?

If you’re a real estate agent, buying a house, or selling your home, you should know what is a material fact in real estate. It’s a crucial term that can heavily influence any decisions about a property. It’s important to recognize and disclose material facts to ensure transparency and fairness in real estate transactions. In this article, we will give you a thorough understanding of what real estate material fact is all about.

What is a material fact in real estate?

A material fact in real estate is any detail or condition of a property that could impact its value, desirability, or the decision-making process of a potential buyer or seller. These facts are not limited to obvious physical defects but can include a wide range of issues, such as legal, financial, or historical aspects of the property.

To put it simply, a material fact is something that, if a buyer discovers it, could change their mind about how to move forward with the property deal – for both homes and commercial properties.

A material fact can affect a real estate deal in three main ways:

• Change the property’s value.
• It can make the buyer or tenant rethink their decision to buy or rent.
• It can lead them to adjust their offer or rent amount.

What are some common examples of material facts?

Here are some examples of material fact disclosure requirements that a real estate professional must meet. 

• Structural issues: Any major defects in the structure of the property must be disclosed. This includes foundation problems, roof leaks, or significant damage.
• Environmental hazards: Presence of hazardous materials such as popcorn ceiling asbestos, lead paint, or radon. Or, environmental risks such as flood zones or proximity to waste disposal sites. Or, pest infestations in the past. 
• Legal matters: Issues such as zoning violations, pending litigation, or disputes over property boundaries.
• Financial concerns: Unpaid property taxes, liens, or special assessments that could affect the financial obligations tied to the property.
• Historical significance: Previous events that might influence a buyer’s decision, such as past violent crimes, deaths, or other stigmatizing occurrences.

What happens if a real estate professional fails to disclose material facts?

Real estate agents and brokers have a legal and ethical duty to disclose this information of material facts about a property to potential buyers and sellers. This responsibility extends beyond merely responding to direct inquiries. They must proactively share relevant information to ensure informed decision-making.

If an agent or seller fails to disclose material facts, or intentionally conceals them, it can lead to legal repercussions, including lawsuits for fraud or misrepresentation. It can also damage the reputation of real estate professionals and erode trust in the market. Remember that transparency is key to fostering a fair and ethical real estate environment.

What are the best ways for agents to manage material facts?

• Encourage thorough property inspections to uncover potential issues early in the transaction process.
• Maintain meticulous records of all disclosures and communications regarding material facts.
• Stay updated on local and federal regulations regarding concealed material facts and disclosure requirements.
• Foster transparent and honest communication with clients to build trust and avoid misunderstandings.

How can buyers protect themselves from any undisclosed material facts?

To protect themselves from undisclosed material facts, buyers should:

• Hire an experienced real estate agent who is familiar with the local market and conducts their own due diligence.
• Research the property and neighborhood. Check public records and online resources for property and neighborhood information. And, ask questions about the property from neighbors for additional insights.
• Don’t avoid home inspections under any circumstances. Hire professional and specialized inspectors. And, review the inspection reports.
• Directly ask the seller and agent about the property’s history and issues. Request all relevant disclosures and documentation.
• Consult a real estate attorney for contract review and advice on rights and protections.
• Include contingency clauses in the real estate contract. Add clauses for inspection, financing, appraisal, and disclosure to protect interests.

Last thoughts

Understanding what is a material fact in real estate, for both residential and commercial properties, is a cornerstone of ethical practice. By ensuring that all pertinent information is shared, real estate professionals can help clients make informed decisions. Moreover, they can protect their interests and uphold the integrity of the real estate market.

Written by Ramona Sinha. July 13, 2024

Ramona is the Senior Content Writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. She has written articles covering a broad range of topics, such as real estate, lending and mortgage, finance, business, taxation, home designs, home improvement projects, decor concepts, and more. An avid traveler, she’s a digital nomad at heart and an animal lover from the depth of her soul.