Material Fact Disclosure
Definition
The legal obligation to reveal information that could affect a party's decision to enter into or the terms of a real estate transaction.
Example
A seller's agent knows the basement floods during heavy rain. This is a material fact that must be disclosed to potential buyers, even if the seller instructs the agent not to mention it. The agent's duty to disclose overrides the seller's instruction.
Exam Tip
Material fact disclosure trumps confidentiality. Even if a client says "don't tell them," agents MUST disclose material facts that affect health, safety, or property value. The only exception: facts specifically excluded by state law (like HIV/AIDS status in many states).
Related Agency Terms
Agency Relationship
A legal relationship in which one person (the agent) is authorized to act on behalf of another person (the principal) in business transactions with third parties.
Fiduciary Duty
The highest legal obligation of trust and confidence owed by an agent to their principal, requiring the agent to act solely in the principal's best interest.
Dual Agency
A situation where a single agent or brokerage represents both the buyer and the seller in the same real estate transaction.
Designated Agency
An arrangement where a brokerage assigns separate agents within the firm to represent the buyer and seller in the same transaction, allowing each client to have dedicated representation.
Transaction Brokerage
A non-agency relationship where the broker facilitates a real estate transaction without representing either party, owing limited duties of honesty, fairness, and competence to both.
Agency by Estoppel
An agency relationship created when a principal's actions or words lead a third party to reasonably believe that an agent has authority, and the principal fails to correct this belief.
Frequently Asked Questions
Test Your Agency Knowledge
Practice with exam-style questions to make sure you can apply Material Fact Disclosure and other agency concepts.