What is a Material Fact?
A material fact in real estate is any information about a property that could reasonably be expected to affect a buyer's decision to purchase or the price they are willing to pay. Sellers and their agents have a legal obligation to disclose known material facts to potential buyers. Failure to disclose can result in lawsuits, rescission of the sale, and financial liability.
Examples of material facts
Structural issues (foundation problems, roof leaks, termite damage), environmental hazards (lead paint, asbestos, mold, radon), water damage or flooding history, death on the property (required in some states), neighborhood issues (planned construction, sex offender proximity in some states), property line disputes, easements that affect use, pending litigation, and unpermitted work or additions.
Disclosure obligations
Most states require sellers to complete a property condition disclosure form listing known defects. The key word is "known" — sellers must disclose what they know but are generally not required to investigate or discover unknown defects. However, willful ignorance (deliberately not looking for problems to avoid disclosure obligations) may not protect a seller from liability.
As-is sales and disclosure
Selling a property as-is does not eliminate the obligation to disclose material facts. As-is means the seller will not make repairs, not that they can hide known problems. A seller who knows the foundation is cracked must disclose this even in an as-is sale.
For wholesalers
When you learn of material facts about a property (from the seller, your inspection, or public records), disclose them to your buyer. Not only is this legally required in most situations, but it builds trust and prevents post-closing disputes that can cost you buyer relationships and referrals.