The single most important concept in North Carolina real estate law is the broker’s duty to disclose Material Facts. It is the ultimate measure of your ethical integrity and legal compliance. What is the definitive, NCREC-mandated definition of a Material Fact, and why is it the foundation of your practice?
Per NC General Statute § 93A-6(a)(1), a Material Fact is defined as ANY fact that could affect a reasonable person’s decision to buy, sell, or lease real property.
The Mandatory Disclosure Mandate
The broker’s duty to disclose is affirmative and proactive:
- Duty to Discover: The broker must conduct a diligent visual inspection of the property and make reasonable inquiries to discover material facts, regardless of whether the seller makes representations.
- Voluntary Disclosure: You must freely and immediately volunteer the material fact to all parties in the transaction—buyers, sellers, and customers—even if the seller asks you to remain silent.
- Timely Disclosure: Disclosure must be made in a timely manner, ideally in writing, before contract formation.
The Four Material Fact Categories (A Final Review)
- Facts About the Property Itself: Structural defects, system malfunctions (HVAC, plumbing), or environmental issues (e.g., mold, radon).
- Facts That Relate Directly to the Property: External factors like zoning changes, highway construction plans, or the existence of restrictive covenants/HOA.
- Facts Directly Affecting the Principal’s Ability to Complete the Transaction: An unexpected lien, a foreclosure filing, or a buyer’s inability to secure financing.
- Facts That are Known to be of Special Importance to a Party: A fact that becomes material because the client has expressed a specific need (e.g., noise levels, proximity to certain amenities).
The Golden Rule: When in doubt about whether a fact is material, DISCLOSE IT. Disclosure protects the public, your client, and ultimately, your license.
Key Takeaway
The definitive Material Fact rule requires NC Real Estate Brokers to disclose ANY fact that would sway a reasonable person’s decision. This NCREC mandate requires proactive discovery (visual inspection) and immediate, full disclosure to all parties to maintain ethical and legal compliance.